Archive for the ‘State Farm Florida’ Category

State Farm Florida – How to Respond to the Big Announcement

January 3, 2010

State Farm Florida Insurance Company announced in January that it is leaving the Florida Property and Casualty Insurance Market.  The only thing left to be decided is when the cancellations will begin.

An estimated 700,000 State Farm Florida home insurance policies that are expected to be cancelled over a two year period – that’s over 29,000 policies that will be cancelled each and every month for two years.  Regardless of your perspective, this is the most significant event that has ever occurred in the history of the Florida homeowners insurance market – and you could not pick a worse time for this to happen.

To begin with, many of the home insurance policies that will be dropped by State Farm Florida will occur at the exact same time that Citizens Property Insurance will be moving forward with higher rates in 2010 as required by law.

Although dumping on big insurance in Florida has become one of our favorite things to do, here are some little known facts that won’t ever make the coverage of State Farm Florida‘s planned withdrawal from the state:

Customers of State Farm Florida love this company, its customer service, the multiline discounts, and the fast and fair claim service they received from the company after the 2004/2005 Florida hurricanes.

When State Farm Insurance FL customers are asked to rate their overall satisfaction with the company on a “1-10” scale, many rate the company as a “10” even if their policy is being cancelled by the company!

Although State Farm Florida’s 47% rate increase was turned down prior to their withdrawal announcement, most of the data that we are collecting says that the annual premiums State Farm Florida policyholders are paying are among the lowest in Florida – partially from the multi-line discounts and also due to the significant wind mitigation credits that many customers are receiving.

None of the above changes the fact that State Farm Florida is leaving the Florida home insurance market.  Given this reality, here is what you need to be aware of if you are a State Farm Florida policyholder and want to take proactive steps in response to the company’s announcement.

To begin with, your State Farm Florida Insurance Agent is not allowed at the present time to present you with any other alternative Florida homeowners insurance companies except for Florida’s state run insurance company of last resort – Citizens Property Insurance Corporation – which has publicly stated that it is currently underfunded and overly dependent on hostile financial bond market borrowing on unfriendly terms in order to pay major hurricane claims.

As you look for companies to replace your State Farm Florida home insurance policy, many of you will be facing increases that range from 70% to over 200% on your annual premium.

Watch for dramatic differences as you move to a new Florida homeowners insurance company – both in terms of the size of the financial surplus it has available to pay your claim and in the headcount it has available for customer service and claims processing.  State Farm Florida has more financial surplus available to pay its claims than the majority of the 40 other companies that are still writing new Florida homeowners insurance business combined!

Much of the advice that you’ve received as a State Farm Florida policyholder has been that you should not take any action now and that you should wait for your Florida home insurance cancellation notice.  If you take that advice you could be very sorry in Florida’s dysfunctional home insurance market:

To begin with, you’ve probably heard reports about many Florida homeowners insurance companies that have stated that they are interested in picking up your State Farm Florida homeowners insurance policy.  Don’t assume that there will be plenty of policies with a new company to go around when your State Farm Florida policy is cancelled.

Some of the companies that initially stated their interest in picking up State Farm Florida policies have tightened up their underwriting guidelines and become more selective about the kind of homes they will accept.  Since the State Farm Florida exit announcement, two companies that had expressed interest in taking on some of the policies have had their licenses temporarily suspended.

Many of the State Farm Florida policies being cancelled are homes that were built between 1950 and 1981 – prior to the higher wind standards in the Florida Building Code improvements made in the 1990’s – not exactly the kind of homes that Florida home insurance companies are going to be anxious to cover.

Because of the financial shortfalls at both Citizens Property Insurance Corporation and The Florida Hurricane Catastrophe Fund, if there is a major Florida hurricane during the 2009 season, don’t expect any companies to be willing to pick up your policy when State Farm Florida cancels it starting in 2010.

Here’s what you should do right now if you are a State Farm Florida home insurance policyholder:

Don’t wait until you receive your cancellation notice – start shopping for a new company right now!

Call several Florida independent home insurance agents that represent multiple homeowners insurance companies and find a new private insurance policy before June 1st when the 2009 hurricane season begins.

Do in depth research on all of the Florida home insurance companies you are considering.  If you get a letter from a Florida home insurance company offering to take over your insurance policy, don’t accept the offer of new coverage until you have thoroughly checked out the new company.

Don’t accept your State Farm Florida home insurance policy being moved into Citizens Property Insurance Corporation unless you have personally done the research and confirmed that there aren’t any private Florida home insurance companies who want to cover your home.

Finally, as someone who knows the score in the Florida property insurance market, you know that finding a new company in Florida has never been easy – from the time of Hurricane Andrew in 1992 and continuing through to today.

That’s why it is essential that you start shopping now for a new policy.  Don’t wait for State Farm Florida to cancel your policy.   If you do, you’ll have the unpleasant experience of scrambling and competing with 29,000 other State Farm policyholders who will be looking for a new Florida home insurance policy at the exact same time that you are.

It’s a game of musical chairs that you have to avoid at all costs!


Michael Letcher is a Fortune 500 executive and a licensed Certified Public Accountant.  His on-line guide can help you find affordable options to Citizens Insurance.  Get all the secrets to low cost Florida insurance in his free newsletter at =>


State Farm Florida – Will it Exit the Florida Property Insurance Market?

January 2, 2010

For a long time, State Farm Insurance FL has been one of the few Fortune 500 home insurance companies still operating in Florida.  It remains by far the largest private company for both homes and autos with 1 million and 2.5 million policies respectively.

They should be commended for that.

After all, many big insurance companies simply left Florida for good after Hurricane Andrew – and never looked back.  That left Florida to deal with the problem on its own and caused it to create its own state run insurance company of last resort to help those who simply could not find coverage.

State Farm Florida Insurance Company did not follow this approach.

It has taken a prudent approach to the market that has been present in Florida since Hurricane Andrew.  These steps have included:

Strict underwriting criteria for homes selected for new business

Multiline discounts for policyholders with home, auto, and life coverage

Selectively cancelling higher risk older homes closer to the coastline

This approach might have been successful during normal, reasonable periods of history.  However, reasonable is not the right word to use for what has happened in Florida in recent years:

From 1992 to 2004, no large insurance companies re-entered the Florida property insurance market – leaving State Farm on its own.

Florida hurricane claims in 2004 and 2005 caused billions of dollars in damage.  State Farm Florida paid millions in claims and had to request an emergency cash infusion from its parent company to recapitalize it.

While the company received significant rate increases following the 2004/2005 hurricanes, large rate increases given to most Florida home insurance companies in 2005 and 2006 caused a major political backlash.  Quite honestly, the public demanded rate relief because Florida home insurance was simply not affordable.

The pressure for lower rates was far worse due to outrageous property taxes and the collapse of the Florida real estate market.

The State of Florida reacted to voter pressure.  However the final impact was not impressive.

Legislation passed in 2007 and 2008 had a limited effect in lowering home insurance rates while shifting billions of dollars in catastrophic hurricane risk to the Florida Hurricane Catastrophe Fund – a state entity that has publicly stated that it can’t meet its reinsurance obligation to insurance companies in part due to the frozen bond markets.

As a result, all companies including State Farm Insurance Florida are concerned that the Florida Cat Fund won’t be there to pay them back after a major hurricane and are looking for new sources of backup reinsurance.

That, combined with other factors led the company to request a 47% rate increase a few months ago.  After state regulators rejected the rate increase, the company appealed that decision in court.  Recently a judge agreed with state regulators that the State Farm Florida 47% rate increase was not justified and also rejected the rate increase.

This brings us to where we are today – a time when many Floridians have to be wondering if State Farm Insurance FL  is preparing to exit the state for good.  This would not be welcome news and would cause a major shock to the Florida property insurance market as policyholders scramble to find other coverage.

You have to be ready for the realities that come with today’s uncertain times.  One of those might be that your State Farm homeowners insurance policy in Florida will be cancelled or dropped.  If that happens there are several things you need to do to respond to this:

Shop your policy.  Most State Farm Florida agents can only offer you homeowners coverage with Citizens Property Insurance after your policy is cancelled.  Find a large independent agent who represents multiple companies in order to give you the best options for replacing State Farm Florida.

There are many new insurance companies local to Florida that have come into existence in the past 15 years, many of which have only been approved since the start of 2006.  Some of these companies might be a good option to replace State Farm but you have to research each and every one of them.  Review their financial ratings and their experience with customer service completely.

Insurance agents for State Farm Florida will be hurt by large cancellations of homeowners insurance policies.  They have spent years building a book of insurance business in Florida.  When they lose your home insurance business, it usually means they lose your car and life insurance business as well.  While you can’t help but be sympathetic, you need to know that it is in your agent’s self interest to keep your auto and life insurance business while putting your home insurance coverage into Citizens Property Insurance Corporation.  Don’t accept being placed with Citizens without looking for other private home insurance companies through other agents that can also offer you auto and life insurance.

Get all the facts if you are thinking about Citizens Property insurance.  Citizens has stated the premiums it charges are not high enough to cover the risks that the company takes.  It is also experiencing problems with borrowing to pay major hurricane claims in today’s shaky bond markets.  Major recommendations being presently considered at Citizens include raising rates, limiting coverage, and mandating certain home hardening measures.  Do your home work on Citizens just like you would for any other company.

While it is impossible to know how this drama with State Farm Insurance FL will conclude, by following these steps you’ll be way ahead of thousands of other policyholders who will all be scrambling to replace their coverage at the same time.


Michael Letcher is a former Fortune 500 executive with Bank of America and W.R. Grace and a licensed CPA.  His on-line buyers guide can help you if you are cancelled by State Farm Florida Insurance Company.  Get his free newsletter at =>