Florida Again Dominates the Insurance Battle

There were two big announcements out of Florida this week, one involving Allstate and one involving State Farm. I’ll tackle State Farm first since it is more complex and the most disingenuous.

Some background is in order for State Farm. When Florida created a state market for cheaper reinsurance it also mandated premium reductions for those who took advantage of the program. Two major insurers filed for rate increases after buying the state reinsurance, Allstate and State Farm. When Insurance Commissioner McCarty ordered rate hearings for the increases (rate hearings in Florida involve public sworn testimony including revealing the basis for the rate increases) State Farm backed down and instead reduced their homeowner premiums in accordance with the law.

As is their custom in states where they do not get their way including here in Mississippi when we dared to litigate against them they announced they will no longer write new homeowner policies in Florida. I like Beatrice Garcia’s reports on insurance news from Florida so today I’ve linked the Miami Herald story on this development.

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.

However unlike Mississippi which kowtows before these large insurance companies Florida’s Office of Insurance Regulation has some arrows left in it’s quiver. Contrast the Florida approach as outlined yesterday and my comment to yesterday’s post of Mississippi’s of letting insurers dump off coast consumers in the state wind pool:

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.

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.”

Isn’t it strange that the insurance company PR departments and trade groups denounce the NFIP as a taxpayer subsidy (it is and was intended as one when it was enacted in 1969) yet expect the taxpayers to bail them out every time they hit a bump in the road? Senator Posey has it exactly right in my opinion and I hope the Florida legislature does not let these insurance companies offload their least desired risk exposures on the taxpayers while continuing to profit handsomely from other lines of business.

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