Market manipulation and price fixing explained to the point even a clown can understand. Paige St John exposes the State Farm shuffle in Florida for the Herald Tribune.

Louisiana Insurance Commissioner Jim Donelon

Folks rarely does a business writer nail and explain a very complex subject in the interplay between our fragmented insurance markets here in the US  and the world of high finance but Paige St John over at the Herald Tribune explains how State Farm really didn’t pull out of Florida’s hurricane insurance market, how they game the anti trust exemption insurers enjoy and how they are able to price gouge as a result.  These same forces are at work in Mississippi, Alabama, Texas and Louisiana.

We last featured Paige’s work last October in our post It’s a ‘Bermudan’ day in the neightborhood…Paige St John at the Herald Tribune exposes why ‘buying Bermuda’ is like being hooked on crack and it is clear Paige is on track for a big time business journalism award for her work in this area.  Finally it was our post on Paige’s reporting on the Allstate McKinsey papers that literally landed us on the national blawg scene as Victoria Pynchon covered our coverage.

Here are a few excerpts:

When State Farm stepped up its march out of Florida, it loudly and publicly claimed hurricanes were pushing it toward financial disaster.

The company argued it had to leave the Florida coast — and drop nearly half a million customers — because it could not profit in a state wracked by so many storms.

But State Farm never really left Florida. Continue reading “Market manipulation and price fixing explained to the point even a clown can understand. Paige St John exposes the State Farm shuffle in Florida for the Herald Tribune.”

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”