State Farm Florida has been one of the few Fortune 500 home insurance companies still operating in Florida for a long time. As the largest private insurance company in the state for both homes and autos, it covers 1 million and 2.5 million policyholders respectively.
They deserve credit for that.
After all, many big insurance companies simply left Florida for good after Hurricane Andrew – and never looked back. That left Florida to deal with the problem on its own and caused it to create its own state run insurance company of last resort to help those who simply could not find coverage.
State Farm Florida did not pursue this path.
It has taken a prudent approach to the market that has been present in Florida since Hurricane Andrew. These steps have included:
Strict underwriting criteria for homes selected for new business
Multiline discounts for policyholders with home, auto, and life coverage
Selectively cancelling higher risk older homes closer to the coastline
This approach might have been successful during normal, reasonable periods of history. However, reasonable is not the right word to use for what has happened in Florida in recent years:
From 1992 to 2004, no large insurance companies re-entered the Florida home insurance market – leaving State Farm on its own.
Florida hurricane claims in 2004 and 2005 caused billions of dollars in damage. State Farm Florida paid millions in claims and had to request an emergency cash infusion from its parent company to recapitalize it.
While the company was able to get significant rate increases after the 04/05 hurricanes, massive rate increases granted to most of the companies in Florida in 2005 and 2006 caused a major political uproar. Quite honestly, the public demanded rate relief because Florida home insurance was simply not affordable.
The pressure for lower rates was far worse due to outrageous property taxes and the collapse of the Florida real estate market.
The State of Florida reacted to voter pressure. However the final impact was not impressive.
Legislation passed in 2007 and 2008 had a limited effect in lowering home insurance rates while shifting billions of dollars in catastrophic hurricane risk to the Florida Hurricane Catastrophe Fund – a state entity that has publicly stated that it can’t meet its reinsurance obligation to insurance companies in part due to the frozen bond markets.
As a result, all companies including State Farm Florida are concerned that the Florida Cat Fund won’t be there to pay them back after a major hurricane and are looking for new sources of backup reinsurance.
That, combined with other factors led the company to request a 47% rate increase a few months ago. After state regulators rejected the rate increase, the company appealed that decision in court. Recently a judge agreed with state regulators that State Farm’s 47% rate increase was not justified and also rejected the rate increase.
This brings us to where we are today – a time when many Floridians have to be wondering if State Farm Florida is preparing to exit the state for good. This would not be good news and would be sure to cause chaos in the Florida home insurance marketplace as consumers scramble to find alternative coverage.
You have to be ready for the realities that come with today’s uncertain times. One of those might be that your State Farm home insurance policy in Florida will be cancelled or dropped. If that happens there are several things you need to do to respond to this:
Shop your policy. Most State Farm Florida agents can only offer you homeowners coverage with Citizens after your policy is cancelled. Find a large independent agent who represents multiple companies in order to give you the best options for replacing State Farm Florida.
There are new Florida base regional insurance companies that have been created over the past 15 years, with many only being recently approved since the start of 2006. Some of these companies might be a good option to replace State Farm but you have to research each and every one of them. Check their financial ratings and customer service history thoroughly.
Insurance agents for State Farm Florida will be hurt by large cancellations of homeowners insurance policies. They have spent years building a book of insurance business in Florida. When they lose your home insurance business, it usually means they lose your car and life insurance business as well. While you can’t help but be sympathetic, you need to know that it is in your agent’s self interest to keep your auto and life insurance business while putting your home insurance coverage into Citizens Property Insurance. Don’t accept being placed with Citizens without looking for other private home insurance companies through other agents that can also offer you auto and life insurance.
If you are considering Citizens Property Insurance, get all the facts. Citizens has said that it does not charge enough premium to cover the risk that it takes. It is also experiencing problems with borrowing to pay major hurricane claims in today’s shaky bond markets. Major recommendations being presently considered at Citizens include raising rates, limiting coverage, and mandating certain home hardening measures. Research Citizens just like you would any other company.
While it is impossible to know how this drama with State Farm will conclude, by following these steps you’ll be way ahead of thousands of other policyholders who will all be scrambling to replace their coverage at the same time.
By skeeze from Pixabay