State Farm Will Drop 50,000 Homeowner Policies in Florida in 2008
By Gerri Elder
On July 19, State Farm Insurance filed paperwork with the state Office of Insurance Regulation in Florida announcing that it intends to drop approximately 50,000 homeowners' policies next year.
The policies that will be dropped are the ones insuring the risky coastal areas in Florida. A spokesman for State Farm said that the homes and condos that will lose coverage are mostly within a few miles of the shoreline, although some homes further inland will be affected. The company feels that the risk is too high to continue insuring homes that are likely to be hit by hurricanes. They say they made this difficult decision in order to continue insuring other homes in Florida which are located further from the coast.
State Farm says that existing policy holders will be insured through the 2007 hurricane season and will be given 4 months notice before their homeowners policies are canceled. The homeowner's policies will begin to be dropped starting in January. As the policies come up for renewal they will be canceled.
The news comes as a surprise to some homeowners who have been pleased with their State Farm insurance policies, despite the rising costs of premiums since the 2004 hurricane season.
State Farm is the largest private home insurer in Florida although state-backed Citizens Property Insurance is the largest overall hurricane insurance provider. Citizens Property Insurance was originally created by lawmakers to sell coverage to those who couldn't get private insurance. They now have the authority to also insure some coastal property even when private coverage is available. So, homeowners who are dropped by State Farm will have the option of purchasing insurance through Citizens Property Insurance so that they will not be left uninsured or uninsurable.
State Farm has also announced that it will be canceling a number of its wind-only policies in Florida. These policies are written when the homeowners are insured by a different carrier and State Farm only covers the homes for wind damage.
Florida Insurance Commissioner Kevin McCarty has issued a statement saying that the Office of Insurance Regulation will look into State Farm's rates after the insurance cancellations are made. If State Farm reduces its exposure to claims through non-renewal of policies that it deems too risky, the insurance regulators in Florida will examine their rates in order to make sure their premiums are not excessive.
McCarty said, "These actions are inconsistent with State Farm's previous statements outlining their underwriting intentions. The office is in the process of reviewing these filings to ensure they are consistent with Florida law."
Florida Chief Financial Officer Alex Sink expressed disappointment with State Farm's decision which he says shows such disregard for long-standing customer relationships.
After all the cancellations, State Farm will still be Florida's largest private home insurer. With over 1 million policies written in Florida, the number of policies that will not be eligible for renewal only account for a small percentage of homeowner policies statewide. Most homes covered by State Farm insurance in Florida will be eligible for renewal in 2008, unless of course they pose a significant risk to State Farm by being located near the turbulent coastline.