State Farm: No new homeowners policies

State Farm, the state’s largest private insurer, won’t write new homeowners policies starting March 1 as it seeks to reduce its exposure to hurricane losses.

BY BEATRICE E. GARCIA
Miami Herald–Feb. 24, 2008

In a move certain to deepen Florida’s insurance crisis, State Farm Florida plans to stop writing new homeowners policies throughout the state starting Saturday.

The state’s largest private insurer of homes also won’t offer new renters or commercial policies in order to reduce its exposure to hurricane risk in Florida.

State Farm’s current policyholders won’t be affected by the move. The company will continue to renew the one million homeowners and renters policies it has in Florida.

The insurer also will continue to write new auto insurance in Florida, a far more lucrative line of insurance than property coverage. It insures more than two million vehicles.

State Farm will cease writing new homeowners policies just days before lawmakers return to Tallahassee to wrestle once again with proposals to make insurance coverage more affordable and available.

In South Florida, State Farm has written very few new policies in the past 10 years. But northern and inland parts of the state would be far more heavily affected by the company’s decision, which will make it more difficult for consumers shopping for a new policy to find coverage.

In another move to limit its exposure to hurricane risk, State Farm announced last July that it wouldn’t renew 50,000 policies, mostly along the coast. Notices began going out to policyholders in November.

Allstate and Nationwide also have been reducing the numbers of policies they write in Florida since the 2004 and 2005 hurricanes crisscrossed the state.

Chris Neal, a company spokesman, on Saturday confirmed State Farm’s plan but couldn’t give any details. State Farm’s 900 agents were informed of the news on Thursday.

In a statement, the company said: “As part of State Farm Florida’s continuing effort to responsibly manage its growth and the financial stability our customers expect and deserve, we’re implementing an overall statewide plan to limit our growth in Florida.”

IN SOUTH FLORIDA

The insurer, whose parent company is based in Bloomington, Ill., has 52,348 policies in Miami-Dade County, 69,496 policies in Broward and 60,361 policies in Palm Beach County, according to the state Office of Insurance Regulation. These totals include homeowners, condominium and renters policies.

Ed Domansky, an OIR spokesman, said that as a courtesy State Farm Florida told regulators of its plan to stop writing new homeowners policies. While OIR regulates insurance company activities in Florida, it has no authority to block State Farm’s move.

Domansky said Insurance Commissioner Kevin McCarty was disappointed by State Farm’s decision.

Both McCarty and OIR General Counsel Steve Parton will see if State Farm will be in compliance with a new law that requires companies to sell homeowners coverage in Florida if they sell other lines here and sell homeowners insurance elsewhere in the country.

Sen. Steve Geller, a Democrat from Cooper City, said he believes State Farm will stay within the bounds of the new law because the company will be renewing existing property insurance policies.

State Farm is trying to curtail its risk if a massive storm hits, particularly in densely populated areas such as South Florida and the Tampa-St. Petersburg area. But Geller wonders if State Farm’s action could also be driven by another motive.

IN THE LEGISLATURE

State Farm and Allstate are aggressive backers of a bill introduced in the Florida House of Representatives last week that would create a statewide windstorm program to write hurricane coverage throughout the state, not just along the coast.

Under that proposal, insurers could decide to write policies without hurricane coverage or still sell traditional multi-peril policies. These policies wouldn’t be subject to surcharges to make up any deficits in the state-run Citizens Property Insurance, the state’s largest insurer of homes and condos.

State Farm’s new move ”could be a threat to get more favorable consideration” of this bill, Geller said.

The bill faces resistance. Sen. Bill Posey, R-Rockledge and chairman of the Senate Banking and Insurance Committee, sees the bill as an “insurance industry relief bill. That’s why it’s a non-starter with me.”

The Florida Legislature begins its session March 4.

POTENTIAL FALLOUT

State Farm’s new plan could put more pressure on Citizens, because many private insurers are writing only a limited number of new policies with windstorm coverage.

Based on research by Michael Letcher’s Home Insurance Buyers Guide, based in Lake Worth, just 21 companies are selling homeowners policies with windstorm coverage in Broward and Miami-Dade counties, for instance.

Citizens has more than 1.3 million policies on its books, with nearly half those in South Florida.

In October, State Farm reached an agreement with Florida regulators to lower homeowner rates by an average of 9 percent statewide to comply with the insurance reform law passed in a special session a year ago.

In 2006, State Farm had negotiated a 52 percent average rate hike with regulators. The increases for many policyholders in South Florida, however, were even higher when they began to see renewal notices late that year.