Hurricane exposure forces State Farm from Florida

[Ed Mahmoud]

State Farm Insurance withdrawing from Florida property market

The state’s largest private insurer will drop 1.2 million policies over the next two years, likely pushing many into the already bloated state-run insurer of last resort, Citizens Property Insurance Corp. More than 800 State Farm agents can expect to see their income slashed by an average of 37 percent, according to documents obtained by the St. Petersburg Times.

And Tallahassee, once more, will take on the state’s rising exposure to catastrophic damage.

State Farm Florida’s policy shedding is widespread, affecting house and condo owners, renters and customers with coverage for personal liability, boats, personal articles, and business property and liability. The insurance giant is hanging on to some lines, including its lucrative, market-leading auto insurance business and life insurance.

State Farm Florida president Jim Thompson said that even without any major hurricanes in the past three years, the Florida operation has been losing $20 million a month and was on pace to go insolvent by 2011. Losing a recent legal battle to hike its property insurance rates by an average of 47 percent was the last straw, he said.

“We regret the impact this will have on our customers, employees and agents in Florida,’’ Thompson said. “However if we had any further weakening of our financial situation, we would not have been in a position to pay all of our claims going forward.’’

[gtalum]

I wonder when the state legislature will outlaw the big insurance companies form selling car insurance in the state when they pull their homeowner's product? That's the way to stop this behavior.

[Ed Mahmoud]

I wonder when the state legislature will outlaw the big insurance companies form selling car insurance in the state when they pull their homeowner's product? That's the way to stop this behavior.

If their exposure to losses from a hurricane on property insurance exceeds the profits on car insurance, they'll just pull out altogether. They aren't allowed to charge rates that would cover their risk exposure, why should they stay in Florida? They are in business to make a profit.

I guess then Florida will sell car insurance and property damage insurance.

[HURAKAN]

The 2004 and 2005 hurricane season are still having repercussions.

[Dionne]

I wonder when the state legislature will outlaw the big insurance companies form selling car insurance in the state when they pull their homeowner's product? That's the way to stop this behavior.

Yeah, that's just what we need, more legislation. Government involvement in free enterprise. Government is already forcing me to buy insurance on trucks, contractors liability, workmens comp.....never had a vehicle accident, never been sued from a job and never had an employee accident.......and we've been carrying all this insurance since '95. It's in the thousands of $$$.

[gtalum]

If their exposure to losses from a hurricane on property insurance exceeds the profits on car insurance, they'll just pull out altogether. They aren't allowed to charge rates that would cover their risk exposure, why should they stay in Florida? They are in business to make a profit.

Trust me. The insurance companies make a massive profit margin on auto insurance. Such a law will bring homeowners' insurance companies back into the state.

Further, they've been making a significant profit on homeowners' policies, even in the bad hurricane years. What they're trying to do is no different than price-gouging.

[gtalum]

Yeah, that's just what we need, more legislation. Government involvement in free enterprise. Government is already forcing me to buy insurance on trucks, contractors liability, workmens comp.....never had a vehicle accident, never been sued from a job and never had an employee accident.......and we've been carrying all this insurance since '95. It's in the thousands of $$$.

Like it or not, sometimes regulation is the answer. The current banking crisis (and ensuing exposure of financial frauds) is evidence enough of that.

[Dee Bee]

I'm a State Farm policy holder in Florida. My husband and I have had State Farm car and homeowner insurance since we married in 1973 in the Chicago area. Those pre-existing policies were the reason we were eligible for a Florida homeowner policy in 2000. Our renewal comes up in July, so we'll be shopping for insurance shortly.

[Derek Ortt]

the article states they are LOSING 20 million per year. That doesn't match with a profit margin

[gtalum]

the article states they are LOSING 20 million per year. That doesn't match with a profit margin

$20 Million per month is their claim. I don't buy it for a second. If they were losing $20 million a month, they'd have pulled out long ago.

[Ed Mahmoud]

Yeah, that's just what we need, more legislation. Government involvement in free enterprise. Government is already forcing me to buy insurance on trucks, contractors liability, workmens comp.....never had a vehicle accident, never been sued from a job and never had an employee accident.......and we've been carrying all this insurance since '95. It's in the thousands of $$$.

Like it or not, sometimes regulation is the answer. The current banking crisis (and ensuing exposure of financial frauds) is evidence enough of that.

I risk getting political, but the seeds of the sub-prime mortgage problem was planted in the late 1970s, watered in the mid 1990s, got a little help this century from the most previous President who believed home ownership was some kind of panacea, and about 3 years ago when a certain politician who ran for President and lost, tried to increase oversite of the two semi-private agencies who purchased a lot of the bad loans, he was shot down, with a little help from people in his party, and a lot of help from the opposition. Congressmen and Senators of both parties had relationships with certain lenders and the two semi-private companies, both business and personal, that didn't just create the appearance of a conflict of interest, but probably did create a conflict of interest. While there was some corrupt bankers, laws that encouraged loans to people of questionable credit and income had more to do with the banking crisis, IMHO, than those greedy Wall Street fat cats that get the majority of the blame.

And, if an insurance company was making such swell profits insuring Florida's hurricane risk, I doubt they would have ever thought of leaving.

[somethingfunny]

Odd that insuring homes in Florida would suddenly become unprofitable when the only storm of note to hit Florida this year (Fay) mostly caused flood damages that aren't even covered by State Farm.

Maybe it's time for insurance companies to either expand their coverage to include everything you'd need insurance against and charge a realistic premium, or for all of them to get out of the game entirely and let the State of Florida pick up the responsibility of protecting its residents' property from hurricane damage. If people don't like that I hear the coast of Georgia is nice too.

[gtalum]

The funny thing is it's not that expensive to insure in the vast majority of Florida. I just bought a new home this summer. For about $300k in coverage, I'm paying just over $1000 per year, and my insurance company is turning profits. And I'm only about 5 miles inland.

[gtalum]

I risk getting political, but the seeds of the sub-prime mortgage problem was planted in the late 1970s, watered in the mid 1990s, got a little help this century from the most previous President who believed home ownership was some kind of panacea, and about 3 years ago when a certain politician who ran for President and lost, tried to increase oversite of the two semi-private agencies who purchased a lot of the bad loans, he was shot down, with a little help from people in his party, and a lot of help from the opposition. Congressmen and Senators of both parties had relationships with certain lenders and the two semi-private companies, both business and personal, that didn't just create the appearance of a conflict of interest, but probably did create a conflict of interest. While there was some corrupt bankers, laws that encouraged loans to people of questionable credit and income had more to do with the banking crisis, IMHO, than those greedy Wall Street fat cats that get the majority of the blame.

Partially agree, partially disagree. But as your own post notes, more oversight (ie, regulation) was necessary and lacking.

And, if an insurance company was making such swell profits insuring Florida's hurricane risk, I doubt they would have ever thought of leaving.

They wish for a higher margin before they try to take the money and run the next time they have to pay claims.

[Dionne]

The funny thing is it's not that expensive to insure in the vast majority of Florida. I just bought a new home this summer. For about $300k in coverage, I'm paying just over $1000 per year, and my insurance company is turning profits. And I'm only about 5 miles inland.

What!!!!?? $1000 per year on 300K. Can we have a company name?

I'm 80 miles inland and cannot get that sort of rate.....although we are in the northern most declared disaster county in Mississippi....Copiah.

[Dee Bee]

The funny thing is it's not that expensive to insure in the vast majority of Florida. I just bought a new home this summer. For about $300k in coverage, I'm paying just over $1000 per year, and my insurance company is turning profits. And I'm only about 5 miles inland.

What!!!!?? $1000 per year on 300K. Can we have a company name?

I'm 80 miles inland and cannot get that sort of rate.....although we are in the northern most declared disaster county in Mississippi....Copiah.

Yes, please, share the name! [I'm in southern Palm Beach County, FL.]

[mf_dolphin]

I don't buy the 20million loss per month either. If they are losing that much it has more to do with their investment losses than with insurance payouts I would bet.

State Farm shifted their auto insurance to another "company" so they could write those policies even after they pull out of Florida. They honored the letter of the law but not the intent. Time for our lawmakers to do their job and close that loophole.

[gtalum]

I get insurance through St. John's. They only write policies in Florida.

To be fair, it's new construction with the newest building codes, so your mileage may vary. My total homeowner's insurance bill (not counting flood, of course) is about $1050 annually. AT my old house, I had been paying nearly $1800 or $150k in coverage, until Safeco dropped me. When I shopped, I found St. John's for about $1200. Then when I shopped for my new house, they came in cheapest again, at about $1050 (for double the coverage!).

If you're in Florida, give them a call (sorry Dionne!). It's generally sold by Allstate agents.

[MGC]

Yea, I'd like the name of the insurance company also. I'm paying over 5K per year on the two houses we own. My sister-in-law just got cancelled by State Farm. Soon there will be no insurance available in Mississippi except the state....MGC