Tying up a few loose ends – Florida puts State Farm on the ropes

There is literally so much financial news out regarding the insurance industry picking topics is like shooting fish in a barrel. For instance we’ve largely ignored Nationwide’s re-mutualization that earned CEO Jurgensen a fat multi-deca million dollar bonus. Unlike the Hartford, Nationwide remains financially solid. One story we have been keeping up with is the ongoing State Farm saga in Florida where there has been lots of news which in turn gives me the opportunity to tie some concepts together. To set this up we first we need to backtrack to a post we could not have done without our very good friend Sup, who is very kind in sharing a lifetime of industry experience with us here at Slabbed:

So why would SF take this other position? I suggest it is to put more pressure on the governor, Mr. McCarty and politicians. If the SF agents have no other options, they will do everything they can to retain these clients by placing them in Citizens, which further jeopardizes that carrier’s solvency. Is this “hard ball”? You bet it is, but it brings the terrible situation in FL to another level.

Sup nailed it of course, this is exactly what the Farm was doing. Imploding Florida Citizens Insurance also makes the entire market toxic for the other P&C carriers which is the other level Sup referred. While the ladies and gents at FLOIR certainly don’t need us to tell them what is happening behind the scenes as Commission McCarty runs a very tight ship, someone at FLOIR reads us on a regular basis and IMHO planned in advance for insurance hardball State Farm style.  Daniels Hays at the National Underwriter picks it up from there:

Florida Insurance Commissioner Kevin McCarty in a harshly worded order has told State Farm it can go forward with its plan to exit the state’s home insurance market, but only under stringent conditions he has set to protect policyholders.

The company, which has 1.2 million home and condominium policyholders in the state, will not be allowed to dump its customers on Citizens Property Insurance Corp., the state-run insurer of last resort, the order states, adding that State Farm should allow its agents to place policies with other private insurers.

The order called the State Farm argument that it needs to withdraw because it faces the danger of insolvency and inability to play claims “both disingenuous and misleading.”

State Farm, the order said, “created its current ‘crisis’ by failing to pursue the opportunities that were available to reduce its expenses and mitigate its decrease in premium volume.”

According to the company, during the first three quarters of 2008 it saw its surplus reduced by $201 million. The company moved to withdraw after it was denied an average rate increase of 47.1 percent…………. Continue reading “Tying up a few loose ends – Florida puts State Farm on the ropes”

Paper Moon or Death Star Part Deux: Consumers Fleeing the Farm.

Turn me on take me for a hard ride
Burn me out leave me on the otherside
I yell and tell it that
Its not my friend
I tear it down I tear it down
And then its born again

Have the Red Hot Chili Peppers pegged Florida’s insurance market? Check this out from yesterday’s Sun Sentinel:

Many of Florida’s 1.2 million State Farm policyholders aren’t waiting to find new property insurance after the surprise announcement last month that State Farm is pulling out of Florida.

And the dozens of small insurers that have entered the market in recent years are jumping at the chance to find new customers.

Sol Woloshin, a longtime State Farm customer who lives in Plantation, dropped his State Farm policy the day after the announcement and signed up with Boca Raton-based People’s Trust.

“I feel much better, sure I do, now that this is resolved,” he said. Continue reading “Paper Moon or Death Star Part Deux: Consumers Fleeing the Farm.”

Some stories I’m following this morning

I must make this super quick as I have a very busy day ahead. First is this story from the National Underwriter on problems with the Florida Hurricane Catastrophe Fund. I noted a detailed discussion of the Demotech Inc (an insurance rating business) that I hope puts to rest concerns about their methodology and why the market needs agencies willing to rate start up insurers. My hope is Steve and Sup pick up the discussion in comments as the story well illustrates the very real problems with Florida’s insurance market. I don’t blame Gov Crist or Commish McCarty though as the industry has resisted and out right undermined (IMHO) good faith legislative efforts there. Nonetheless the State of Florida is having a hard time bucking recent trends in the credit markets:

The Florida Hurricane Catastrophe Fund, a key reinsurance provider, has a shortfall of $18.5 billion, which could pose problems for some of the state’s recent insurance startups, state officials indicated.

Jack Nicholson, chief operating officer for the state fund, said yesterday, prior to a briefing session with the State Senate Ways and Means Committee, that the fund under legislation approved last year is required to provide $29 billion in reinsurance, but may not be able to meet that obligation under today’s bond market conditions.

In November of last year, Dublin, Ohio-based rating firm of Demotech Inc. put insurers on notice that “the potential inability” of the Florida Hurricane Catastrophe Fund to honor claims adversely affects the ratings of carriers dependent on the reinsurance it provides.

Next up is from the front page of the Sun Herald. Steve will tell you that I took a good bit of heat for voicing the opinion that land buyouts were a great idea back in the fall of 2007. I really scratched my head at the anger the mere mention of the idea generated and quite frankly the image the locals projected at the public hearings was very poor. There is a behind the scenes tie in to the Bay St Louis/FEMA map controversy and the post Katrina annexation of the marshland off Highway 603 commonly known as Shoreline Park. Flooding out with both Ike and Gustav has since taken some of the starch and venom away from the buyout concept. With the amount of higher land that is available in the area there is simply no excuse to not indulge our greener instincts and let marshland be marshland. And besides the duck hunting is excellent. Nowdy hopefully will take it from here as we’ve discussed this a good bit offline: Continue reading “Some stories I’m following this morning”

Paper Moon or Death Star? The Farm Strikes Back in Florida

Sup was kind enough to email me his take on recent State Farm actions in Florida and IMHO is spot on. First let’s back up to Nowdy’s post yesterday which featured a recent article from the Insurance Journal:

Florida Chief Financial Officer Alex Sink is urging State Farm Florida to “immediately” let its agents do business with other insurance companies for their more than one million policyholders now that State Farm is withdrawing from the state.

But State Farm has rejected the idea.

Sink called State Farm Florida’s contracts with its agents “inappropriate” for limiting them to placing business only with State Farm but stopped short of calling the arrangement illegal.

Has State Farm really cast their agents adrift as Nowdy’s setup piece implies? Or are they an army of financial destruction? Sup pick’s it up from here:

One must read between the lines as to SF’s position on not provinding alternative markets for their agents with their recent decision to non-renew all Homeowner polices in FL. On the surface it seems like a simple business decision based on their contract and historically Direct Writers only allowed their agents to sell their products. Continue reading “Paper Moon or Death Star? The Farm Strikes Back in Florida”

Around the GO Zone in 60 Seconds: Drinking ‘Shroom juice at the Wall Street Journal, Cottages, Community, Warr and Wind Pool

I must be quick so I can get on the road to Buzzard Roost and there are several items that we need to cover so let’s start with the men and women on the Wall Street Journal’s Editorial board who evidently found a local source for psyclobin mushrooms (and consumed alot of tea) before they wrote this:

Mr. Crist’s behavior stands in contrast to that of Louisiana, of all places. Baton Rouge also established a Citizens insurer after Katrina but only as a “last resort.” Louisiana has a thriving private insurance market, in part because regulators have let companies adjust their rates. By law, Louisiana Citizens cannot offer competitive prices, save in a few high-risk coastal areas. From a peak of about 170,000 policies in 2007, it now holds about 130,000 (about what it had before Katrina) and is aiming to get below 100,000.

Note how these lit and hallucinating buffoons neglected to mention how many policies Louisiana Citizen’s had in 2004 and 2005 or the fact the guy running Louisiana Citizens (now under federal indictment) that entire time was paying his daughter’s prom bill with policyholder premiums.  Maybe next time they should check with Jim Brown before they have their combo mushroom binges/editorial board meetings. Since Bob Bartley died the only thing I can add about the remaining folks in opinion at the WSJ is that you guys really suck.

Watching the cottage controversy unfold from afar I shake my head at the utter uselessness of the approach taken by certain of the affordable housing advocates. Nowdy, who happens to know a thing or two about these type issues, contends in our internal Slabbed editorial board meetings very real issues are being obscured by the yet “another Thompson/Barbour pissing contest” and I’m inclined to agree and in this case I don’t blame our Gov.  It is simple economics; throwing money putting people without means into “affordable housing” does nothing to fix the larger problem.  Good paying jobs makes housing affordable. Meantime we have renters that actually work full time who are wondering where they will live when the FEMA rental assistance program ends this month. To the extent the renters work, received no grant and have no shot at a freebie cottage they have my sympathies. And since they work they can’t spend time raising cain at local City council meetings which brings us back to the “uselessness”. Solutions to thorny issues lie in the advancement of knowledge and awareness. People of goodwill can genuinely disagree but that doesn’t mean they can’t work together trying to find workable solutions to hard issues. Sometimes the politicians don’t make it easy but I’ve found both the Bay and Waveland the city councils are listening to a variety of opinions and genuinely want to do what is best for the community. Continue reading “Around the GO Zone in 60 Seconds: Drinking ‘Shroom juice at the Wall Street Journal, Cottages, Community, Warr and Wind Pool”

The Florida Press Excoriates State Farm. Gov Crist Neither Captured or Impressed.

According the the Insurance Information Institute Mississippians pay the 6th highest rates for homeowners insurance (HO) in the country in a state with 6 coastal counties of 82 total. We are one slot ahead of earthquake prone California, three slots below the Florida, the entire state of which is prone to Hurricane wind damage.  By way of contrast South Carolina’s HO rates come in at number 16 despite being low and having a very developed coastline. North Carolina, with it’s famous outer banks of inhabited barrier islands comes in at 33 while Georgia, home to historic Savannah check in at 27. Texas and Louisiana check in with the highest and second highest HO rates respectively. While our good friend Sup can (and hopefully will) list the variety of reasons homewoners insurance rates vary so much from State to State for purposes of the remainder of this post I’ll operate under the assumption that in the complexity of the insurance marketpace and the associated state by state market fragmentation lies opportunity. Such as the opportunity for an insurer with a nationwide and global viewpoint to generate additional profit via ye old money change by statutory fiat. Perhaps this post will illustrate why.

We will begin with a compare and contrast between how Florida Governor Crist has handled big insurance versus our elected insurance commissioner’s genuflect  and beg approach. The Mississippi GOP has chosen to directly subsidize our wind pool with the money going to buy more reinsurance. Florida, OTOH now requires transparency and learned first hand that bending over backwards for insurers didn’t mean the citizens got a good deal. Does State Farm’s announcement it was leaving Florida last week really mean Mississippi’s insurance market (where State Farm is refusing to write new policies) is “healthier” than Florida’s (where the Farm is pulling out)? Let’s start with Commissioner Chaney’s press release on that topic:

Commissioner Chaney also states in the letter that the Mississippi insurance market is in a very different and much healthier position than the Florida market.

“The Mississippi Insurance Department has worked very diligently to avoid finding Mississippi in the same situation as Florida,” Chaney said.

Do average Mississippians buy into that? Let’s hear what they have to say:

“The politicians have given the insurance companies a license to steal.”

“They are a full line insurance company. They should not be allowed to cherry pick. Our insurance commission should run them out of the state.”

“Time to take the policies for my life insurance, wifes life insurance, the 3 vehicles that are insured, the RV’s insurance and health coverage somewhere else. If enough policy holders would actually do this also, we could run them off the coast. Insurance Commission won’t do it.”

“Why are we allowing the insurance companies to hold the residents of the Mississippi hostage? For decades, we’ve paid whatever they have requested, and when the first major catastrophe hits, this is the treatment we receive. If State Farm is so adamant in their position in the way they do business in our state, why are they still here? Why are we accepting this treatment?”

The difference is striking and begs a natural question. Are coasties drinking all the koolaid or are our elected officials here in Mississippi peeing on our legs claiming rain? The press and editorial boards across Florida are giving this insurance thang a hard looksie (H/T Steve). First off is columnist Michael Mayo of the Orlando Sun Sentinel who comes to the conclusion we need a good multi peril solution in his column “How do we cure Florida’s sick property insurance system?”: Continue reading “The Florida Press Excoriates State Farm. Gov Crist Neither Captured or Impressed.”

Industry Schism! State Farm Blasted by Florida Competitor

Rock of ages cleft for Floridee’
we will no longer hide ourselves behind thee;
let the tears and the blood,
from the wounded policyholders which flowed,
be the sin of the perpetrator;
save us from that wrath and make me pure

As our wayward brothers and sisters come home it appears the Farm has met it’s match in Commissioner McCarty at FLOIR.   Daniel Hays at the National Underwriter has the Farm slam:

In an unusual action, the head of a small, rival carrier has issued a statement slamming the decision by insurance giant State Farm to drop its Florida property business as “disgusting.”

The critical comment from Mike Gold, chief executive officer of Boca Raton, Fla.-based Peoples Trust Insurance Company, was coupled with an announcement that he and Florida officials will shortly unveil a plan to fix the state’s insurance market.

His comments followed State Farm’s announcement yesterday that a “weakened financial position” was forcing it to stop selling homeowners insurance after its request for an average 47.1 percent rate increase was denied.

State Farm, Florida’s largest private property insurer, said that within two years it will phase out more than 1.2 million home and condominium policies.

Mr. Gold said it “is absolutely disgusting what State Farm is doing, abandoning Florida homeowners after profiting for years on their policies.” Continue reading “Industry Schism! State Farm Blasted by Florida Competitor”

Don’t get mad get Slabbed: Welcome to the Farm’s Jilted Policyholders in Florida

H/T Steve for the new jingle.

Type State Farm in our search box for the myriad of ways the Farm fleeced it’s customers here after Katrina. If ou want to know what Mississippians who have dealt with the Farm first hand think click here and scroll to the comments. These two sum it up:

All coastal states should band together and tell State Farm and the others, if they are a full line insurance company they cannot cherry pick. I am afraid our new ins. commish. will just roll over too.

Why would anyone anywhere in the nation want to insure with State Farm? Can’t people see what’s going on. I know that after Katrina, SF held their rates for awhile because they were trying to save a little of the terrible reputation they had left. These b_____ds need to be in a MS jail, not in the insurance business. Nope, never had SF insurance, no grudge, just can smell a rat from a mile away.

So it could be worse folks. Your insurance commish could be captured by the industry he is supposed to regulate like ours in Mississippi who indeed has done a great job working for State Farm. (Vid capture coming soon, Commissioner McCarty will love it. ;-).

sop

Breaking: State Farm Dumps Florida….

We’ve blogged about State Farm’s wacky schemes to price gouge Florida consumers many times here before beginning with mass cancellations right on through to their beat down by the hand of Florida Insurance Commish Kevin McCarty. Other posts on this subject can be found here and here. As Mississippians can attest first hand the good neighbor fights very dirty and this Florida pullout fills that bill. We can only hope McCarty shows them the door completely and in the entirety not allowing the Farm to cheery pick profitable business while dumping their less desireable lines on the taxpayers.  Daniel Hays at the National Underwriter has the story:

State Farm, Florida’s second largest property insurer, said today it is pulling out of the Florida home insurance marketplace two weeks after being turned down for a 47.1 average rate increase by the state regulator.

The company said it had filed plans to discontinue its Florida property insurance product lines because of its “substantially weakened financial position” related to its inability to obtain approval of “what it believes to be adequate property insurance rates.”

Florida Insurance Commissioner Kevin McCarty on Jan. 13 had upheld an administrative law judge’s ruling that State Farm had not proven a case for an increase.

In a statement today Mr. McCarty said, “Although this is disappointing news for Floridians, who have been loyal customers of State Farm, we are not surprised by State Farm’s decision to stop offering all property insurance in Florida.”

He said the Office of Insurance Regulation had “been hearing for months of possible plans to make such a move in Florida, including a document submitted to the office as recently as Dec. 5 as part of their recoupment filing that showed an anticipated reduction to 655,000 HO policies by 2010.” Continue reading “Breaking: State Farm Dumps Florida….”

Some Good Neighborly Greed From the Good Hands People Part 2: State Farm Enters the Florida Fray

Part 1 of this series detailed how Allstate tried to game the system in Florida to fleece consumers. While Allstate was hammering out their settlement with Commissioner McCarty at FLOIR. State Farm decided to make a run at Commissioner McCarty when they filed for a 47% rate increase last month. Hindsight reveals their timing was terrible as Allstate has since agreed to pay a substantial fine, write new policies and cut rates. The cat is out of the bag now and the State Farm rate hearings were big news last week in Florida. It seems State Farm evidently thinks they can pull the same baloney as Allstate and make it stick where Allstate has failed. The news coverage tells a different the story, however. We start with the coverage in the Palm Beach Post:

State regulators appear poised to reject State Farm Florida’s proposed homeowner rate hike of almost 50 percent, announcing at the close of a hearing Tuesday that the insurer had made a series of miscalculations in determining its premium needs.

State Farm overstated its hurricane risk by not fully taking into account its plan to drop 50,000 coastal policyholders, used unauthorized hurricane catastrophe models in determining its rate need and adjusted the models to reflect losses four times greater than what they would have been, said Ed Domansky, a spokesman for the state Office of Insurance Regulation.

Domansky’s comments reflected the line of questioning from a panel of regulators at the three-hour rating hearing who continually challenged the assertions of State Farm Florida that its financial stability depends on the rate hikes. Continue reading “Some Good Neighborly Greed From the Good Hands People Part 2: State Farm Enters the Florida Fray”