Florida State Farm agents ask homeowners not to leave them

Jacksonville Business Journal–March 6, 2009

by Rachel Witkowski Staff Writer

JACKSONVILLE – For State Farm agent Debra Braddock, the business she’s built for 25 years with the same company will be the only insurance business she plans to do in her lifetime.

“I would leave the insurance industry before I leave State Farm,” she said.

There are nearly 80 other State Farm agents in Northeast Florida, like Braddock, who have struggled with less income and fewer customers as independent insurance agents and domestic insurers prey on their business.

State Farm Florida Insurance Co. announced it would withdraw from the property insurance market in Florida, which has rattled homeowners with State Farm policies. Other domestic insurers and independent agents are heavily advertising to the 1.2 million State Farm policyholders across Florida.

“I know we’ll take a financial hit, but what’s even more emotionally draining and painful is that we built these relationships,” she said. “That’s what State Farm is all about.”

Though Braddock said she has only lost about five accounts out of thousands that Braddock Insurance Agency Inc. has, she shares the same message that her fellow agents have been sending their customers: Be patient. The soonest that people could lose their State Farm property insurance is six months from now, and probably not for a year in Northeast Florida, which has a lower risk of being hit by a hurricane, industry advocates said.

State Farm agents caution about the stability of some insurance companies wanting to take over their policies. Agents also said the type of coverage being offered through lower rates with other insurers can be far different from what State Farm offers. State Farm Florida is the largest homeowners’ insurer in Northeast Florida with 102,639 policies, representing 24 percent of the market as of Sept. 30, according to the Florida Office of Insurance Regulation.

State Farm agents are also waiting for State Farm and regulators to come to an agreement on whether agents will be allowed to write homeowners insurance policies with other carriers so they can keep their book of business.

“The 800-pound gorilla in the corner is if the insurance commissioner [Kevin McCarty] says he wants State Farm to write with up to 16 other domestic insurers” in Florida, said Bob Lotane, director of communications and political affairs at the Florida Association of Insurance and Financial Advisors.

State Farm agents can only write policies with State Farm and Citizens Property Insurance Corp., but they want the freedom to go to other companies, too.

“The clients would not have to start shopping and we could continue to be the agent for them,” said State Farm agent Craig Dewhurst, who runs an agency at World Golf Village.

Dewhurst, like other agents, said he is concerned about the solvency of other insurers, since many of them are new companies with an average $5 million to $10 million in capital, and all of them depend on Florida’s underfunded Hurricane Catastrophe Fund for reinsurance.

“I don’t feel as comfortable in writing homeowners’ policies with companies that don’t have a proven track record,” he said. “But not many companies with a proven track record are left in the state.”

The regulators and state officials have publicly announced that the other carriers had enough capital to be approved for business through the insurance regulation office and they have the capacity to cover State Farm’s property policyholders.
Few cancellations

Of the clients who have shopped for other carriers, Dewhurst said many of those customers get quotes 50 percent higher than State Farm’s rates. He’s had fewer than 10 clients cancel their policies.

Braddock said she recently had a client with a home in Marsh Landing get a quote from other insurers. The lowest premium quote among the other carriers was $7,852, whereas State Farm offered the client $3,780.

Even if State Farm Florida had a rate increase approved, “we would still be cheaper,” she said.

There are 78 State Farm agents in Northeast Florida, according to the insurer, each with staff who help operate the agency. Dewhurst said there is also a State Farm operations center that employs more than 2,000 people on the Southside, some of whom service the agencies.

State Farm agent Russ Vorhis, who has operated Russ Vorhis Insurance Agency Inc. in Orange Park for seven years, has gone from five employees to two at his agency. But despite some losses from the withdrawal announcement and a year of State Farm not taking new homeowners policies, Vorhis said he can understand why State Farm is leaving “when everything they do gets shot down” by the state government and regulators.

Many insurance industry advocates were shaken up by Gov. Charlie Crist’s “good riddance” comments about State Farm after it announced the withdrawal in January. “Florida will be much better off without them,” Crist said to media outlets.

“He’s talking about me and the families that I employ,” Vorhis said. “We’re here to insure the community. We’re not just here to make a buck.”