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State Farm, Florida Agree to Stay Out of Court until June
By Jeff Harrington, Times Staff Writer
Posted: May 12, 2009 04:28 PM
State Farm and Florida insurance regulators have called a cease-fire on going to court as they continue negotiating over how the giant insurer can conduct an orderly withdrawal from Florida's property insurance market.
The two sides filed a joint motion with the state's Division of Administrative Hearings to hold the case in abeyance until June 15 as talks continue.
"Until our talks break down, there's no need for a hearing," State Farm spokesman Chris Neal said. "Both sides think having to go to court right now would be counterproductive."
State Farm, the biggest property insurer in Florida, signaled its plan to pull out of the state's property insurance market in late January, citing rising losses and the risk of heavy hurricane claims. It intends to drop about 1.2 million policies over the next two years, 700,000 of them covering homeowners.
Florida Insurance Commissioner Kevin McCarty, however, has set conditions for withdrawal that State Farm is balking at. For one, he wants State Farm to give up its certification as an insurer, which the insurer said could hurt its access to buy reinsurance. McCarty also wants State Farm to allow its agents to sell other companies' policies.
State regulators say one of their biggest issues is to steer discarded State Farm policies to other private insurers and avoid putting more high-risk policies into state-run Citizens Property Insurance. Citizens, the state's insurer of last resort, is allowed to assess all insurance policyholders statewide if it cannot pay claims after a major storm.
Florida OKs State Farm Pull-Out, with Conditions
Fri Feb 13, 2009 1:25pm EST
MIAMI (Reuters) - Florida regulators approved on Friday a plan by State Farm to pull out of the property insurance market in the state, but only if it avoids dumping policyholders into a state-run pool.
The privately held insurance company announced last month it would abandon the Florida property insurance market within two years because state regulators rejected a 47 percent rate increase it said it needed to offset hurricane risks.
Florida Insurance Commissioner Kevin McCarty said he approved State Farm's plan to stop renewing 1.2 million property insurance policies, but only with several major conditions he called necessary to ensure a smooth transition.
State Farm Florida must help move policies into the private marketplace and cannot move any into Citizens Property Insurance Corp, the state-run pool of last resort for homeowners who cannot get private coverage.
State Farm Florida is a stand-alone subsidiary of Illinois-based State Farm Mutual Automobile Insurance Co and is Florida's second-largest property insurer, behind only Citizens.
McCarty's order also says State Farm must let its agents sell policies underwritten by other private insurers and must issue pro-rated refunds of premiums to policyholders who cancel State Farm policies on boats and autos as well as property.
It also requires that State Farm "shall consider all offers to buy or assume all or part of its business" and shall provide copies of such offers to McCarty's office within 48 hours of receipt.
"I could not approve the withdrawal plan State Farm submitted, because, as Florida law states, I believe that plan was 'hazardous' to State Farm policyholders and to the public," McCarty said.
"State Farm intended to dump all of its customers into Citizens and that is not acceptable for their customers or for the people of Florida."
State Farm now has 21 days to decide whether to agree to McCarty's order or seek an administrative hearing with the Office of Insurance Regulation, which McCarty heads.
"We'll need to study the OIR's opinion more closely, but we do appreciate its quick consideration of the plan. We hope to have further conversations with the OIR to create an orderly process that is best for our customers, our agents and the marketplace," State Farm Florida said in a statement.
The company said it already allows its agents to serve policies transferred out of Citizens to other state-approved insurers.
(Reporting by Jane Sutton; editing by Richard Chang)
© Thomson Reuters 2009 All rights reserved
State Farm to Exit Florida Property Insurance
Jan 27, 2009, 4:45 p.m. EST
By Alistair Barr, MarketWatch
SAN FRANCISCO (MarketWatch) -- State Farm, the largest U.S. property and casualty insurer, said Tuesday that it will pull out of Florida's property insurance market, saying it can't charge enough to cover the risk of catastrophes like hurricanes.
State Farm has been the largest private property insurer in Florida, so when it leaves, thousands of homeowners and other policyholders in the state will have to look for coverage elsewhere.
The withdrawal plan includes coverage for homeowners, renters, condominium unit owners, personal liability, boats, personal articles, and business property and liability policies. More than 700,000 homeowners will be affected, State Farm said.
Florida has been hit by several large hurricanes in recent years, leaving property insurers responsible for billions of dollars in claims. The companies have asked regulators in the state for permission to increase premiums to cover future catastrophe risks.
However, the requested rate increases have been large, making coverage very expensive, so regulators have blocked some of them.
In July, State Farm's Florida unit filed for an overall statewide homeowners insurance rate increase of 47.1%. The request was rejected on Jan. 12 by the state Office of Insurance Regulation, the insurer said.
"Faced with steeply declining resources to cover future claims and expenses, State Farm Florida has little choice," Jim Thompson, president of State Farm Florida, said in a written statement. "This is not an action we wanted to take, but one we must take given the realities of the Florida property insurance market."
The company, which is private, said it still plans to sell auto, life and health insurance in Florida, though its network of agents.
Alistair Barr is a reporter for MarketWatch in San Francisco.