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.
“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:
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.
What 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.