State Farm policyholders find few options to switch carriers

Most South Florida homeowners are staying with State Farm for now, because they’re finding higher prices or less coverage as they shop around.

By Julie Patel

South Florida Sun-Sentinel–March 20, 2009

State Farm customers were expected to make a mad dash for other property insurers, but it’s been more like a crawl.

Most South Florida homeowners are staying with State Farm for now, because they’re finding higher prices or less coverage as they shop around.

That’s what a handful of local insurance agents say they’ve seen since State Farm Florida Insurance Co. said on Jan. 27 that it’s leaving the state’s property insurance market.

There has been a modest increase in the number of homeowners canceling their policies, State Farm spokesman Chris Neal said.

The trend counters the predictions of Gov. Charlie Crist and state Insurance Commissioner Kevin McCarty that there would be fierce competition for State Farm policies.

“They probably charge about the highest rates in the state, anyway,” Crist said after State Farm announced its exit strategy.

Weeks before the State Farm announcement, the Florida Office of Insurance Regulation and an administrative law judge rejected the company’s proposed average rate boost of 47 percent or 67 percent. Insurance regulators said the company didn’t prove the increase was needed.

State Farm officials say they are dropping their 1.2 million property insurance policies — including more than 120,000 in Broward and Palm Beach counties — over two years because the company would be insolvent by 2011 at the rate it’s collecting premiums and paying claims and other expenses. Some State Farm customers say they would have preferred having the choice of a higher premium with State Farm.

Customers who shopped around and found better deals switched insurers, but most haven’t, said Robert Palmiotto, a State Farm agent in Fort Lauderdale. He said four of his agency’s 665 residential property insurance policyholders have switched to other insurers. “We should be hemorrhaging if our rates were that bad,” Palmiotto said.

Independent agents who sell policies for multiple private insurers say few State Farm customers have switched.

“We’re wasting a lot of time talking to State Farm people,” said Mike Sunberg, co-owner of Fort Lauderdale-based Barkley Insurance Agency. “They’re saying they want to leave now. Then we give them a rate and it’s higher, and they don’t want to leave.”

Sunberg said State Farm’s prices were cheaper for more than half of the 35 home insurance quotes employees at his agency recently provided customers. Many of the cheaper policies are for condominium units, or they don’t cover certain things.

Former State Farm customer Catherine Mathewson was told by agents that she wouldn’t be able to find private insurance. She kept shopping anyway and found five companies with much higher rates.

Then she found out she could get a policy with Olympus Insurance for $1,760, about $600 less than her State Farm premium. She jumped for it even though it excludes the unlimited living expenses during repairs that State Farm offered and $47,000 in coverage for home upgrades.

“I’m a little nervous thinking maybe I should have kept my State Farm coverage,” said Mathewson, a flight attendant.

State Farm agents — who can only switch policies to state-backed Citizens Property Insurance Corp. at this point — said Citizens’ rates are typically higher even though the premiums have been frozen since 2006.

State Farm agent Alan Edwards in Davie said his agency has provided about 70 Citizens quotes to people, mostly higher premiums than State Farm. Peggy Waite, a State Farm agent in Fort Lauderdale, said none of her 1,200 residential property insurance clients have switched.

Last week, Sen. Mike Bennett told McCarty at an insurance committee meeting that State Farm customers calling his office are reporting “substantially higher” rate quotes from other property insurers. McCarty said insurers and policyholders premiums vary based on factors such as where people live, the age of their homes and discounts offered.

State Farm has discounts for customers with multiple policies with the company and people with no prior claims.Many older homes covered by State Farm will see an increase with other insurers especially if they aren’t fortified against storms, said Pat McNamara, the business development manager of Boca Raton-based Burke, Bogart & Brownell.

State Farm virtually stopped selling new policies in South Florida around 1995, so its policies are “more weighted to older homes,” said Edwards, the State Farm agent in Davie. Some insurers won’t take older homes, and Citizens’ surcharge for older homes is higher that State Farm’s.

State Farm customers who live east of Interstate 95 already have windstorm coverage through Citizens, so many of their rates won’t change. Some State Farm condominiums aren’t fortified yet so doing that could save money.

Customers should shop soon for new policies because some insurers limit how many policies they will sell in any one ZIP code, said Sunberg of Barkley Insurance.

Ed Domansky, a spokesman for the state Office of Insurance Regulation, suggests asking independent agents for quotes.

“Customers need to recognize that State Farm agents would like to keep as many of their customers as they can,” Domansky said.