A.M. Best Reports on State Farm Florida Status
Jul 2, 2009
The stay applicable to the administrative appeal filed by State Farm from the Florida Office of Insurance Regulation’s conditional approval of its proposed property insurance withdrawal from Florida is currently set to expire on July 15th. Unless this matter is settled, State Farm and the OIR will either have to agree to a further stay of proceedings, or prepare for an administrative hearing.
An A.M. Best article reporting on the status of the State Farm matter is reprinted below.
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Florida Regulators, State Farm Florida Appear Headed to Court Over Withdrawal Plan
Negotiations between Florida regulators and State Farm Florida concerning the insurer’s plans to withdraw from the state’s property insurance market appear to be at a stalemate, and with a deadline approaching, an administrative court date looks imminent.
Asked if the two sides were headed to court, Ed Domansky, spokesman for the Florida Office of Insurance, said, “I think that is accurate.”
By July 15, the OIR and State Farm are to report the progress of negotiations to the Division of Administrative Hearings. A hearing would be set “if no agreement is reached or further abeyance is asked for and granted,” Domansky said.
McCarty approved State Farm Florida’s two-year plan to withdraw from the property insurance market, submitted early this year, but the commissioner attached conditions. McCarty wants to bar State Farm from penalizing policyholders for terminating their contracts early and from preventing its agents from working with other companies. McCarty also had concerns that the company had no plan to transfer its policies to the private market instead of state-run Citizens Property Insurance Corp. (BestWire, Feb. 13, 2009).
These issues remain unresolved, Domansky said. Furthermore, the OIR immediately wants State Farm’s certificate to write insurance but the company wants to hold it during the course of its exit from the market. The company intends to stay to write automobile insurance.
Meanwhile, State Farm Florida said it believes “productive talks continue” and the company “is committed to continuing active talks,” said spokeswoman Michal Connolly.
Robert Lotane, spokesman for the National Association of Insurance and Financial Advisors of Florida, said they have “heard nothing positive about the talks” and agents were under the impression the matter was definitely headed to the courts. NAIFA-Florida says it represents a majority of State Farm agents — independent contractors who sell only State Farm policies. The insurer’s agents can also assist policyholders who look to move from Citizens.
State Farm plans not to renew the last of its 1.2 million property insurance policies during the fourth quarter of 2011. The insurer’s withdrawal plans were submitted about two weeks after McCarty issued a final order denying a 47% average statewide rate increase State Farm first filed in July 2008 (BestWire, Jan. 12, 2009). The company said that under current conditions it would be insolvent by 2011.
Domansky said there remains a long road ahead. An appearance before DOAH is just the first step and could be followed by lengthy appeals. It could be at least 18 months before State Farm Florida’s withdrawal process could begin.
Lotane said State Farm Florida agents worked hard to assure customers their policies were not going anywhere for a while. He said there has been a shrinkage in the policy count since State Farm Florida submitted its plan but “the big rush to the exits that some predicted appears not to have happened.”
A.M. Best Co. in June downgraded the financial strength rating to B (Fair) from B+ (Good) and issuer credit rating to “bb” from “bbb-” of State Farm Florida Insurance Co. The outlook was revised to negative from stable. This was based on State Farm Florida’s recent “significant deterioration in earnings and risk-adjusted capitalization and the expectation that this deterioration will continue over the near to intermediate term,” A.M. Best said (BestWire, June 18, 2009).
The top five writers of homeowners multiperil in Florida, according to 2008 A.M. Best Co. state/line product information based on direct premiums written, were: State Farm Group, with a 18.7% market share; Citizens Property Insurance Corp., with 17.1%; Universal P&C Insurance Co., with 7.6%; USAA Group, with 5.4%; and Tower Hill Group, with 4.7%.
(By Chad Hemenway, associate editor, BestWeek: Chad.Hemenway@ambest.com)
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