State Farm announces it is leaving the National Flood Insurance Program. FEMA still asleep at the switch.

Now that State Farm’s fleecing of the NFIP has been laid bare for all to see predictably, like a spoiled brat, Ed Rust and his gang of thugs in Bloomington are picking up their toys and going home.  Paige St John at the Herald Tribune has the story: (h/t to a reader)

State Farm Mutual confirmed Thursday that it will stop administering federal flood insurance policies this fall, leaving government officials to find a new home for 800,000 customers nationwide who bought their coverage through the company.

State Farm does not insure property against floods or storm surge. But it is the nation’s largest administrator of such policies written by the National Flood Insurance Program.

In exchange for administrative fees and commissions, State Farm writes federal flood policies and handles claims, including sending adjusters to homes to assess damage.

Predictably FEMA had no clue what was happening in the program they are supposed to be overseeing:

It was unclear Thursday how government officials would respond. A spokesperson in the Federal Emergency Management Agency’s Washington office said she was unaware of State Farm’s withdrawal.

What this means is State Farm has made itself irrelevant to the ongoing NFIP debate and again highlights the folly of trying to segregate Hurricane perils between the private and public sectors. Without the old scam of assigning all the loss to flood (ie the taxpayers) and taking credit on the other side it is clear the private market is not capable of providing windstorm coverage to the over 50% of America’s population living within 50 miles of a coastline.

Thanks Ed.

sop

8 thoughts on “State Farm announces it is leaving the National Flood Insurance Program. FEMA still asleep at the switch.”

  1. This is going to be a bigger problem that what appears on the surface. If State Farm indeed pulls out of the NFIP and all those insureds have to go to independent agents…I is going to be a nightmare for homeowners

  2. I think what will happen is SF agents can still handle the Flood. SF is just not going to participate in the WYO program. Now agents will go directly to NFIP and not through the WYO. This is the way it was done prior to WYO being introduced in the early nineties.

  3. The reason State Farm is leaving is FEMA finally is implmenting some of the basic internal controls in the NFIP the GAO has been recommending since 2006 including basing the administrative fees on reality (IE actul costs) instead of fantasy (Ed Rust’s bonus). Plus the claims dumping gig is up for Hurricanes so SF can no longer use the NFIP as a vehicle to socialize their losses.

    Sup is right about how the agents will handle it. Make no mistake this move is a step in the process where the value of SF agencies is diminshed. Slowly but surely Ed Rust is doing his sales force the same thing Wilson is doing the Allstate agents. Unbridled greed is a terrible thing.

    Follow the money folks as it sets us all free.

    sop

  4. Sop, even with more oversight having a WYO program can still be very lucrative for a carrier. I feel the heat SF has taken over the Katrina claims was a considerable factor in this decision. As this unfolds it could also negatively impact policyholders when there is a “wind” or “water” question if the HO and Flood carriers disagree. My experience with Flood from the Easter Flood in Jackson is the independent adjusters for the NFIP “throw” money at homeowners. If that has not changed the NFIP will still come out overpaying.

  5. This is not bad— I repeat not bad. Since State Farm was the largest h/o insurer (not sure if they still are), hopefully the extreme conflicts of interest that were present during Katrina will be alleviated to a certain extent.

    I suspect their h/o claims handling practices will not change, but I still think its good.

  6. Me, too, NRB and I wonder how long it will be before Allstate and the other “all in this together” companies follow.

  7. I don’t think we will see a mass exodus of carriers from the WYO due to the lucrative nature of the endeavor. Most carriers, including ALL, use a third party vendor to handle the processing. I don’t know if SF had that arrangement or was handling Flood “in house”. If they were handling “in house” this will provide an immediate expense savingfor them.

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