State Farm announces pull-out from Florida – sends me letter that they’ll still take my money for auto

I am not certain how much national attention this story received but State Farm announced last week that they will be pulling their Homeowner’s Insurance coverage from Florida because their request of a 47% rate increase was rejected.

Actually, they said they planned to request the 67% rate hike but only requested a 47% hike because they figured they had a better chance of getting the 47% increase approved.

Let’s think about that a second. A 47% rate hike?

Let’s say that you just paid $2,000 for homeowners insurance, you would have to pay $2,940 the next year.

If you planned on buying a television for $2,000 would you be okay paying almost $3,000 for the same TV later? Then again, at least you could shop for a different brand of TV. We don’t have that luxury in Florida with homeowner’s insurance as most companies either bailed out of Florida already or no longer write new policies to home owners.

That means if your homeowner’s insurance policy is cancelled, most likely you will have to seek coverage from Citizens Property Insurance Company – a nonprofit company established in 2002 to offer Floridians coverage where private insurers will not write policies.  

Florida Insurance Commissioner Kevin McCarty had rejected the State Farm bid for the huge increase.  

kevin-mccarty

Florida Insurance Commissioner Kevin McCarty

“I will do everything within my power to protect Florida consumers from unnecessary destabilization of the insurance market that this might cause and to ensure that Florida consumers are protected and have access to insurance at rates that are not excessive or unfairly discriminatory,” McCarty said.

We’re very disappointed with (the Florida Office of Insurance Regulation’s) decision not to grant rate relief,” State Farm spokesman Chris Neal said. “We believe the facts we presented should have led to a different outcome.”

A 47% increase isn’t rate relief? What about the 9% increase in 2007? I would say that this is relief – but a 47% increase? That’s rate rape.

“The courts have backed up the insurance commissioner and the result is lower rates,” said Bill Newton, director of Florida Consumers Action Network. “State Farm ought to play it a little straighter and ask for a realistic rate backed up by the numbers, not a speculative shoot-for-the-moon number.”

As a result of the rejection, State Farm has announced that they will pull out of Florida – no longer renewing the policies for the 1.2 million customers. The excuse, of course, is due to the losses they have suffered since the 2004 hurricane season.

I admit that they had big losses in 2004 and 2005 but the last 3 years have been particularly light and should have been profitable. And what about all the other years before 2004 when hurricane seasons had been light?

State Farm claims that since 2000 they have paid out $1.21 in claims for every dollar they have collected in premiums. They said that they have suffered billions of dollars in losses due to the 4 major hurricanes hit Florida.

In 1998, State Farm Florida was created as a separate entity “to address what the company called the ‘unique risks’ of doing business in Florida. Do they have the same types of entities to deal with earthquakes and mudslides in California, tornados in Kansas, or hurricanes in the other Gulf Coast states?

Since they didn’t get their massive rate increase, State Farm is planning on taking their toys and going home.

Well not all their toys. Just the ones that may not make money.

I received a letter from State Farm that read:

Dear State Farm Policyholder,

You may have seen or heard the recent announcement that State Farm Florida Insurance Company (State Farm Florida) has submitted a plan to discontinue its property insurance lines in Florida. I want to clarify for you that this plan involves insurance coverage only for homeowners, renters, condominium unit owners, personal liability, boats, personal watercraft, personal articles and business property and liability policies.

State Farm Mutual Automobile Insurance Company (State Farm Mutual) and its affiliated companies will continue to provide – as they have for decades – automobile insurance, life insurance, health insurance and other financial products and services in Florida.

State Farm has kindly informed me that my homeowners, flood insurance, wind (hurricane), mold and personal articles and property will no longer be covered in the future. But they will gladly continue to accept my money for my automobile insurance.

Uh, I think not.

state-farm-logoWhat State Farm doesn’t get is that I’ve stayed with their insurance company all these years because of the multi-line discount they offered. I also suspected that if they reduced the coverage to some customers, the likelihood diminished the more lines of coverage you had.

Since they no longer want my business for the riskier investments, I’ll have to look around to see if there are any companies out there willing to provide me these lost policies. Of course, I will not keep my automobile coverage with them either.

I suspect that this is the general feeling by all of the 1.2 million of us who are about to lose our coverage. I know Governor Charlie Crist agrees and has told State Farm that if they are going to drop the homeowner’s coverage that they should pick up their agents and get out of Florida.

State Farm has been charging some of the highest rates in our state for a long time. They haven’t been very friendly to our people and if they want to leave the state goodbye,” Crist says.

“I don’t think we need them,” Crist says. “I don’t want to work with them to give them a rate increase hell no.”

I agree with the governor. My rates are very high across the board but as I was fearful they would drop my coverage, I paid for the extra lines of coverage since my options for homeowners insurance was so limited.

 

Sources:

Regulators reject State Farm rate hike

http://www.sun-sentinel.com/sfl-statefarm0112,0,1433397.story

State Farm to stop insuring Florida

Governor Crist sounds off on State Farm

State of Florida case: – State Farm Florida Insurance Company, Petitioner, vs. Office of Insurance Regulation, Respondent


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18 responses to “State Farm announces pull-out from Florida – sends me letter that they’ll still take my money for auto

  1. I figured that was coming sooner or later… They were just about the only big company left and had become a monopoly down there… Most of the mobile home owners I think had either dropped their insurance or the insurance companies had dropped them, because it was so expensive they couldn’t afford it.
    That’s what happened to me when we lived there, it would have been cheaper to replace my mobile than pay the insurance…lol
    I finally sold out and moved into an apartment because the insurance and taxes were just getting too much… since then I just moved back to MO…just couldn’t take FL any longer…

  2. I don't live in Florida either.

    State Farm a monopoly? Get a clue. No other major insurance company with assets adequate to pay for another huge hurricane will write insurance any more in Fla. State Farm hung in there to the bitter end.

    You livec in a mobile home and you thought your premiums were too high? That is laughable. Mobile homes are like cardboard boxes in a hurricane. The high premium on mobile homes is your “clue” that the risk of insuring a mobile home in florida is very, very, very, very, very, very, very, very unfavorable. The word “dangerous” comes to mind. Insurance companies are not social service agencies. They are in the business of making at least some profit. They also do not have “tax payers” to tax if their funds are depleted following a huge storm. Why would any insurance company want to write policies in Florida?

    The rest of the country is sick of Florida residents who want to live on sandbars belly-aching about their insurance premiums and demanding the rest of us that live in parts of the country that are not on sandbars finance your insurance premiums.

    Get real.

  3. To “I don’t live in Florida either’:
    I suggest that you look at a map. We don’t live on a sandbar. I guess you’re also sick of the people in New Orleans? How about the people of California who get subjected to earthquakes, fires and mudslides? And Kansas with their tornados?

    I suspect that you are jealous of our weather this time of year.

    Take a look at the number of hurricanes that have hit Florida between 1970 and 2003. Or after 2005.

    And we have never asked you to pay our insurance premiums. Get your facts straight before coming here.

  4. Annette,

    State Farm, I believe, is the last major company in Florida but they haven’t been writing new policies for many years. I suspected that they would also leave.

    There are smaller companies here that are writing policies but the one that is getting the most business is Citizens.

    Many people are moving out of Florida because the costs (taxes and insurance) are too high and the schools and job opportunities are not great.

  5. I don’t live in Florida but it will add, Good riddance to bad garbage. You go governor!!

  6. I am sitting in a part of Florida that has 10% unemployment. I say let SF stay, give them some sort of increase and let the customers decide whether or not they will pay it.

    I can’t see adding all the Sf people to the unemployment lines at a time like this.

    Also, Citizens is government supported. My premiums were very high when I had them. As taxpayers can we afford to put more properties with Citizens? According to the news, they already insure more homes in Florida than anyone else, State Farm being number 2.

  7. I’m not sure that the agents would be unemployed. The 1.2 million homeowners will need agents to write the new policies.

    State Farm isn’t happy with some sort of increase. They asked for a 47% increase and said the insane number wasn’t a plot to get a smaller increase. It looks to me, then, like it was all or nothing.

  8. We use to insure our home and rental properties with State Farm. Then a few years ago, we noticed that we had a huge rate increase. So we checked with Erie Insurance which covers our cars. Got a better rate, went with Erie and dropped State Farm. I think Erie may only be a PA state wide insurer.

  9. I have an agents name who will be providing me with the companies writing new homeowner’s policies in Florida. The only thing that is certain is that my rates will drop significantly.

    Every time I spoke to my State Farm agent – who I’ve been with over 20 years – she tries to sell me additional coverage that I don’t need. I can tell you that I won’t be missing that.

  10. Send that info my way

    This message is to my2bucks…when you get the list of ocmpanies writing new homeower’s policies in Florida, can you publish that here? I can’t even get my agend to call me back
    😦

  11. My 2 buck$:

    You clearly are showing your ignorance. You are wrong on many accounts.

    1) State Farm has been writing property insurance and only ceased upon their January announcment. I purchased a policy from them in December.

    2) You worry about claims from other states…..guess what, State Farm has a separate company for Texas (a major hurricane near Houston would be nightmare) And a separate company in California. Also, Californians buy their earthquake insurance from the State ( I moved from there last year) not the privat market.

    3) The government is the only entity that backs flood insurance.

    4) Having fewer private companies isn’t good. I’ve never heard of half of these smaller companies. Bet most will be bankrupt the next time there is a hurrice

    5) Governor Crist has rolled the dice for Florida. We will be bankrupt when the next one hits.

    I’m depressed…maybe I should move back to California. IT’s bad when Florida makes Califonia look good.

    I’m bummed State Farm is leaving, but I don’t blame them. How can a company stay in business when it costs more to offer a product than what it can charge. Ironically, they are actually being responsible. Leaving before they are bankrupt. Other companies have allowed it to go on the back of other customers (Citizens, Poe) Check your bill and see all the assessments….it’s because you’re bailing everyone else out that wasn’t responsible.

    Wise up, dude!

  12. Daniella,
    Nice of you to only half read this post. Clearly you missed the entire point.

    1) State Farm told me personally, that they were no longer writing policies for NEW homeowners. That held true to me in 1998 and 2004. It could have changed but my agent told me that they will not write a new policy for me if I have any sort of gap in coverage. It could be the area where I live. I go by what the company told me.

    2) I don’t worry about claims from other states. I just wondered if other states have separate companies (like State Farm Texas) to deal specifically of the disasters in that state. I didn’t care enough to do Google searches. I figured a reader would know since this blog isn’t limited to Florida.

    3) I purchase Flood insurance from State Farm and have for as long as I’ve owned a house.

    4) I agree – we are all better off with more competition. More choices generally mean lower prices. It seems pretty obvious that State Farm pulled the rate increase number out of their asses. I’ve been with State Farm for my home and auto coverage since I began driving and renting / owning. I’d prefer them to stay but I would not pay 47% more than I already do. Since they are planning on dropping my home coverage, I am going to drop my auto. I have every right to do so.

    5) With the economy in the toilet, we better not get hit by any disasters anywhere in the country.

    I haven’t heard of many of these companies either but there are a bunch. I thought you were suggesting that more companies were better.

    You also seem to forget that State Farm Florida has been taking in money for years with only paying minimal claims. You may wish to see how they managed / invested their money when times were good.

    Your last sentence doesn’t make any sense at all. The other large companies were responsible (according to you) because they left Florida earlier or limited their number of policies turning all of the other homeowners to Citizens and other small companies.

    Yes, some smaller companies went under but the larger companies cut people loose. I will cut you a break since you have only been in the state for a couple of months.

  13. I am a insurance agency in Volusia Cnty., we are securing homeowner and have found the State Farm agents are not accepting the clients cancellation requests – even when written on Accord 35 cancellation requests. It seems they want to hold the policies until the 11th hour. I feel for them we have been in the same type of boat with Florida. Citizens has it’s place but the object is to not be in the state insurance so all agents appointed to citizens can access your property information, contact information and call you send you confusing offers to come out of citizens. Florida is a place that attracts seniors to come and retire on a fixed income. This is why the gov’t fights to keep rates down. If the seniors leave we only have Mickey left. In the future when insurance companies ask for their appointments make them have one company for auto and home and see if that would be attractive. Insurance companies are believing their own story of “our homeowners company” is losing money-when in fact auto and home together are making money.

  14. Denise,
    Thank you for this information. I didn’t realize that State Farm has been refusing to honor the cancellation requests.

  15. ORLANDONATIVE

    I work for state farm, it amazes how much misinformation out there is taken as fact and then spread around in blogs like this one.
    1. State Farm had written homeowners’ policies until March of 08, but only in specific areas outside the hurricane setback.

    2. The 47% increase was across the state, not for each policyholder, so for example the central Florida portion would have been 6 – 8% tops, the coastal areas we still insure would have been higher.

    3. State Farm is one of the very few A++ Companies still writing in the state, do some research on http://www.ambest.com, most of these new companies that the “state” would like you to insure with aren’t even viable enough to be rated. Most mortgage companies won’t allow you to insure with a company that is rated less than A. Good luck with your claim in a catastrophic year like 2004.

    4. State Farm Florida has been draining State Farm Mutual for over 10 years. Between the hurricances in 02, 04 & 05 our claim losses were millions above all the premium collected since we have done business in Florida over 80 years. Our surplus (thats the cash set aside for cat claims) has been depleted in 07 and 08 to the tune of over 213Million dollars. We have continued to borrow and borrow and borrow from State Farm Mutual for over 10 years, with no ability to ever even pay back on the loans. As a company if your body is healthy but your right arm has grangrene at some point you have to quit putting ointment on it and cut it off. If we cannot find options to make State Farm’s homeowners profitable we need to leave. It is a business, not a charity.

    5. Christ’s big plan is his beloved Citizen’s, who has been bankrupted over 5 times, and when they finally were able, thru assesments on all our auto and policies to fund it, he took out 250 million of their built up assests to fund another pet project. When we do have another hurricane, Citizen’s will asses us all again, could be 10% could be 45% to cover the losses.

    6. Finally, isn’t this a free market economy, aren’t State Farm’s clients capable of shopping that market and making their own decisions if State Farms rates and company standing are worth the value. Why do our clients need someone else to tell them what they value in their insurance company.

  16. ORLANDONATIVE

    Sorry, we have never refused to honor cancellations with other companies, it is our policy to first contact our insured directly to verify their decision, this policy is necessary due to unscrupulous companies who cancel policies with other companies with only a quote being given to the insured. Many times our clients tell us that they only wanted a quote, they hadn’t approved the cancellation. If they have gone with another company we cancel immediately. It is to protect our clients.

  17. Orlando,
    Anyone can claim they work for State Farm and then say that I’m spreading misinformation like you did.

    1. I mentioned my specific situation, so I guess I live within the ‘hurricane setback.’ If I’m not stating the facts, then MY STATE FARM AGENT LIED TO ME! I’ve been with this particular agent for more than 20 years so I believe that they would tell me the truth.

    2. Obviously, the 47% wouldn’t be clear across the board. It is an average. But if areas are only increasing by 6-8%, then logic dictates that others will receive an increase GREATER than 47%.

    3. I believe I stated the reason why I stayed with State Farm all these years – or did you miss that I am a State Farm customer? My argument is that if you’re going to pull out of Florida and force me to get homeowners, flood and personal property insurance elsewhere, I’m taking my auto insurance too. It’s my right, just like State Farm has the right to leave.

    If my insurance premiums were going to increase by another 47% (on average), I would have taken my business elsewhere.

    I know a number of people who had smaller – lesser known – insurance companies who did very well after the 2005 storms and each of these small companies are still in business.

    4. Maybe my arm became gangrenous because of neglect or mishandling. I realize that State Farm has had a large number of claims filed against it due to hurricanes but doesn’t State Farm invest their premiums in order to increase their money? How has the corporate investments been going?

    State Farm decided to go into the homeowner’s insurance business. Now they’ve decided to get out – in Florida. Apparently you’ve missed my entire point, but then again, I don’t think you care about my point. You just came here hoping to spread your corporate talking points.

    I said repeatedly, that if State Farm is going to drop some of my lines of coverage, I have every right to drop my remaining ones.

    5. Your point 5 made no sense. By the way, the governor’s name is Crist. There is no ‘h’. And why are you talking about Citizen’s ‘asses’?

    6. You’re 6th point validates my point, thank you very much. I said, for the umpteenth time. If you are cancelling my Homeowners, flood and personal property insurance policies – it is my right in this free market to take my auto insurance policies to a competitor. Right?

    I appreciate your input on the additional comment. – like about verifying the cancellation requests with the policy holder. It’s a good business practice and you’re absolutely correct. Many industries try to play games like pulling customers away through unethical practices – most notably the old long distance carrier game.

  18. my2bucks,

    I work for a State Farm agent, which is different than being a State Farm employee. I have worked in Ohio and now Nevada.

    I think I may be able to clear up some misunderstandings.

    From what I have read here…you AND the SF employee are right. SF Florida was writing new home business until recently. However, your agent was correct in telling you that if you have had a gap in coverage, you may not be eligible. It sounds like that’s point of difference…the gap in coverage.

    While your State Farm agent services your flood policy, the insurance is actually through the Federal governement. No private insurance company (that I’ve ever heard of) will insure for flood…they can only act as a service point for the policy.

    This next bit is my opinion/thoughts on the disput over why State Farm wasn’t able to make enough on investments to prevent the need for such a drastic rate increase. A good insurance company must ALWAYS have enough money to pay out all their policies if the worst were to happen. While State Farm’s losses may not have been catastrophic during all years, that doesn’t mean they still weren’t paying out a lot in claims. I don’t know what their actual profit margin was, but it COULD be that they weren’t profiting enough to keep the neccessary reserve AND make enough through investing to prevent the rate increases.

    Also, for all insurance companies ALL rate increases MUST be approved by the commissioner. It is POSSIBLE that the commissioner has denied neccessary increases in the past and State Farm has had to accept lower increases or none at all to stay in Florida, neither party knowing how bad things were about to become. My guess is that this time, due to increased stress across the board for State Farm (and everyone) due to the recession over the last year, they had to draw a hard line.

    I think it is very unfortunate that State Farm and the commissioner were not able to work better together in the past. But similarly to the rest of the nation…when things are booming…well, I’m sure you get it.

    I also feel terrible when I hear stories about State Farm agents who are mistreating their clients. I have worked for six different agents over the years and they are all very different. Some were really focused on their business and customer care…others were distracted and left the bulk of the work to their employees and neglected their duties as the owner and agent.

    I think it helps to see all companies like a city…there are pockets of wonderful communities where everyone knows each other’s name and looks out for one another…while a few miles down the road the area is stricken with robberies and shootings. In general, I believe State Farm is a great company. But when you get down to the nitty gritty specifics, of course there are downfalls. Sort of like the USA, sure we’ve got faults…but is there any doubt that it is still the greatest place to live, with the most opportunities, with the most people clamoring for entry and citizenship?

    Anyway…that’s my 2 cents ; )