(This post is longer than we normally write … but the situation is complex and has great potential to impact all Polk County businesses. If you want a healthy local economy in the future – it’s well worth the read and you’ll find email links at the end to do your part. We have never suggested you forward a blog post but we encourage you to do just that — send this link to every Florida taxpayer you know. – BG)
State Farm’s decision to withdraw from Florida’s property insurance market has rocked the state … but perhaps more troubling is Governor Crist’s “good riddance” attitude toward a company that, under currently approved rates, would become insolvent as early as 2011. One doesn’t have to look far to see the results of companies less prudent – the line for bail out money is ever expanding.
No community in Florida – perhaps no county stands to lose more if State Farm is forced to exit all lines of business (as Crist has suggested) than 
Winter Haven and Polk. Those who remember when State Farm first located its regional office to Highway 17 North in 1962 can testify to the incredible economic impact it brought to our area. Within 10 years of the office opening, Winter Haven saw each of it’s three banks expand their locations, Southeast Plaza opened and Winter Haven Hospital had built its multi-storied tower. Southeast Winter Haven exploded with growth as John Wood and other developers built to accommodate the workforce.
But it didn’t stop there. State Farm is more than “a good neighbor.” They are a model corporate citizen. It would be difficult to find a local cause, project or service organization that has not benefited from the involvement of State Farm and its employees.
Contrast the current Tallahassee attitude to the fact that not long ago Governor Jeb Bush visited the Cypress Gardens Boulevard complex and told employees assembled in the massive foyer that State Farm was the premier “student mentoring organization” within the state. The company makes a major commitment to education and encourages their employees to mentor students while they are “on the clock.”
Cooler heads must prevail to address the current situation. Here is what the Florida Chamber had to say about State Farm’s property insurance decision.
“State Farm Florida’s announcement is extremely disappointing but understandable. This should serve as a wake-up call that conditions in Florida’s property insurance market are unsustainable and we are financially unprepared for a major hurricane. It is critical that Florida look at making improvements to restore the health of our property insurance market and reduce our overreliance on state-run insurance companies to provide affordable hurricane insurance by charging less than actuarially sound rates. We need a healthy property insurance market where the risk of hurricanes is not on the taxpayers’ backs but on private insurance companies.
For nearly 80 years, State Farm has been one of the state’s most significant corporate citizens, providing Floridians with strong and secure products to protect their property. State Farm has consistently been a significant contributor to Florida’s economy, providing more than 10,000 jobs throughout the state as well as contributing millions of dollars annually that support our state’s economy through investment in our communities and essential state infrastructure.
This decision by State Farm is a clear indication of the risk inherent with Florida’s unstable property insurance market and our over reliance on post-hurricane assessments. Hopefully we won’t have to see them leave the state, but we recognize the significant risk private insurers must be willing to accept to write hurricane insurance in Florida.”
It is indeed ironic that faced with falling tax revenues the Legislature finds no other alternative to balance the budget than cutting services. Yet State Farm – a private company – is expected to insure tremendous risk (think 2004 hurricane season) with declining reserves. The fact is – if you are paying out more than you are taking in — you just can’t make it up in volume.
Furthermore it is really a personal matter for you and every other citizen of Florida. Here’s what Orlando Sentinel columnist Mike Thomas wrote January 29.
“State Farm is bailing out of Florida, and Charlie Crist says good riddance. I’m not sure the thousands of policyholders about to be thrown into the maw of Charlie’s socialized insurance market will agree. And the consequences extend well beyond that.
State Farm is about to dump 1.2 million policies, which means a massive expansion of the state-run Citizens Property Insurance. That will put taxpayers at even greater risk when the next big hurricane hits because Citizens is woefully underfunded.
It also threatens the credit rating of not only the state but also the dozens of small private insurance companies that have set up shop in the past few years. Those insurers, many of them untested in a catastrophic event, depend on the state’s ability to borrow money to help them pay their claims after a major storm. That borrowing capacity is dwindling as the gap between the state’s hurricane obligations and its ability to meet them grows.
A major rating agency for small insurers, Demotech, has notified them that they have until May 15 to demonstrate an ability to pay claims if the Florida Hurricane Catastrophe Fund goes bust, which would be a given after a major storm.
The fund is obligated to pay out $29 billion in claims but only has about $10 billion in the bank — most of that borrowed money, by the way.
You need insurance to buy a house. A wholesale rating downgrade of Florida’s insurance carriers could roil a real-estate market just showing signs of life.
This is serious stuff. And it could not be happening at a worse time … Crist has Florida on a path toward junk-bond status. It would have been better to simply give State Farm its rate increase. As a State Farm customer, I would have liked the option of accepting the increase or going with a different insurer. I don’t need Crist and company making that decision for me. This also would have created a much more orderly retreat of State Farm from the Florida market. Alas, it did not fit in the script Charlie has written for his moral crusade against the insurance industry. (You can read Mr. Thomas’s complete column here.)
And we would add, if Citizens runs out of money to pay claims … who will cover the shortfall?
All Florida residents should now look in the nearest mirror.
This IS serious stuff. It is time we become as neighborly to State Farm as they and their 10,000 Florida employees have been to us. Send a positive note of encouragement to Governor Crist and our Legislative delegation today. This situation demands compromise.
We suggest you write the email, copy the text and send to the following ….
this article completely opened my eyes. state farm is an important piece of this community and needs to be here. it is a free market…..let them raise their rates. their customers can chose to pay or get a new carrier. it’s ultimately pretty simple. all it does is create competition and that only benefits the consumer.
Well-written, Bob! Consider my emails sent…
Thank for staying on top of this. State Farm Insurance is a business and a business is of course here to make money.
I agree with Stan, let the home owners decide if the rates are too high. Crist is getting too big for his britches on this one.
Bob – thanks for articulating the State Farm situation so well. I will do my part.
This is well written. These major insurance companies are not leaving the State of Florida because they don’t want to sell insurance. They are leaving because they can not charge premiums commensurate with the risk.
Our government needs to let the free market work. If Governor Crist is correct that there is ample creditable well capitalized companies to takeover my insurance then let State Farm increase their premium and let me the consumer make the decision whether I change carriers or not.
I can tell you when we get the next hurricane (and we will some day) that I want my carrier to be well capitalized and able to pay my claim.
We have read how undercapitalized Citizen’s Insurance is and how it will need massive rate hikes to increase its capital. Why isn’t the State of Florida charging sustainable rates now?
When we have a storm that undercapitalization will be paid by the citizens of Florida themselves. Just look at your auto as well as your homeowners insurance premium bill, we are paying a surcharge to fund Citizen’s Insurance even now.
This vendetta of Governor Crist against State Farm is short sighted and not in the best interests of the citizens of the State of Florida. Please take the time to inform our representatives as this is the only way this can be corrected. Also, let the Governor know too; he now has made this personal.
LIKE WE NEED ANY MORE UNEMPLOYMENT
I want to make sure people understand something… because it seems like many people are angry as if something is being taken from them… and then their reaction is ‘get out’… that doesn’t really make much sense. So what people are saying is “I need you, but if you want to leave… then get out!” Sounds like the end of a bad marriage doesn’t it? But here is the problem. In 1992 Andrew destroyed south Florida. Billions and BILLIONS in damage. Then in 2004… in an unprecedented and unpredictable event… Three hurricanes in about 6 weeks hit Florida and crossed, no less, in about the same place all three times in the middle of the state again costing again billions of dollars and LEVELING Punta Gorda. I don’t care how much ‘profit’ that was allegedly supposed to have been being made… that’s gonna absorb any money that was reserved at that time… case and point. It was at this point around when housing prices were at their highest right before the bubble popped that insurance companies realized that they were going to need more premium to ensure their policies… and then Crist slapped on the ‘cap’ due to an EXTREMELY ignorant campaign promise and an obedient insurance commission. By doing this Crist unconstitutionally destroyed competition by impeding free market. As a result insurance companies (Not JUST State Farm) had to start dropping it’s coastal policies, being the ones at the most risk and higher value homes, because if something happened to them… there wouldn’t be enough money collected in premiums to cover the damage in a catastrophic event. Unfortunately this series of events altered the original purpose of Citizens… originally supposed to be a low cost option for people who couldn’t afford private insurance, now transformed into insurance for people with no private insurance available due to Crist’s ignorance. This gave Citizens the green light (as in any monopoly) to charge what the heck they want to. —
However, people also need to understand that there is risk in any purchase from bubble gum to Corvettes. It is assumed that if you bought a Corvette that you can afford the insurance… I mean the car is expensive… so repairing it expensive… it’s a fast car… higher risk of getting into an accident at high speeds…so the insurance is going to be expensive. Same thing with a house. A house is expensive… and if it’s near the coast it is more likely to be damaged by large storms… therefore it is more expensive to fix and more likely to get damaged, therefore the premiums will be higher. So the moral of the story is, if you can’t afford the risk (i.e. insurance) then you can’t afford the house. Home ownership is not a birth-rite. If you can’t afford home insurance, you live in an apartment. But you DON’T cap premiums and run out all the private insurers and FORCE everyone to buy government run insurance… that is SOCIALISM! –
In a healthy economy, competition keeps prices reasonable for BOTH customers and businesses. If prices are too high… then a business has to lower its prices to keep its customers and then go even lower to attract them. State Farm was at least honest enough to tell it’s customers ‘Sorry, we want you to find another home insurer because we just don’t have enough money to promise you coverage’… instead of lying to them and then just not paying their claim when they make one due to state imposed inadequate rates. State Farm provided a product.. assurance that if something happened, pending it was a covered peril, they would pay for it… and people got that product… It’s just now State Farm is no longer able to provide that product… and people seem to be upset because nothing bad happened to them??,… like they want some sort of refund because their house didn’t get destroyed??… Seems like a very irrational reaction to me. State Farm didn’t take anything from anyone. State Farm, I’m sure, would LOVE to continue providing homeowner’s insurance, but at rates that it can keep it’s promise to it’s customers. Insurance is a product… not a savings account. Be happy nothing bad happened to you if it didn’t, and if something did and your claim got paid… then you got what you paid for.
As a State Farm agent, I appreciate your good comments. This is a sad for Florida. My agency and my company have worked so hard to be good citizens. I employ four people full-time; I have friends who will lose their jobs with no place to go without up-rooting entire families. What I think Gov Crist and Mr. McCarty need to understand that if Walmart built a location that was producing a profit and they weren’t allowed to increase their prices, then the corporate office would say “shut it down…this is not a “non-profit” organization. Free markets will set the rates. if clients don’t want to pay our rates, then they can go somewhere else for coverage, but, Government shouldn’t be involved in the process.I am embarrassed that our leader could be so cavalier about such a serious matter. I guess he just doesn’t care about the 20,000 or so tax-paying citizens who will be affected. Let’s know just how much he truly cares, huh?
And to think I voted for Crist!
Crist needs to brush up on his people skills and do some factful research before spatting off ridiculous distasteful comments about State Farm. I have been with State Farm since I was 16. I am now almost 50. Never, ever have I had any problems or been treating with anything but the uttermost respect and yes, just like a good neighbor, they have always been there for me. Mr. Crist on the other hand, will not be getting any future votes or support from me. I stand behind my insurance company and hope that the higher rates will be granted, so that I do not have to be forced to go to a substandard insurance company and be subject to inaccurate compensation or none at all, if a hurricane does hit.
State Farm remains a good neighbor. Chist a good neighbor? No so much
Tony Boy is a great employee @ State Farm. His friendly attitude and concious effort to earn our business made the difference for us. Once we signed on with State Farm 39 years ago this April, we knew State Farm would be there for us in time of need. We need to reconsider this and keep State Farm and Tony Boy in Florida!
Whatever happened to freedom of choice, Mr. Crist? Who is this man to tell us what insurance we can have? He should mind is own finances (since he has a lot more than most of us) and let us decide if we want to pay more. I’ll gladly pay a higher premium, double if I have to, to have a reliable company when the next storm hits to repair my house!
It’s heartwarming to finally read some ‘fair and balanced’ remarks and supportive sentiments toward State Farm and all of us who so proudly represent this wonderful company. We are being crucified by Charlie Crist, the politicians, many Floridians, and most of the media. I have been a State Farm agent for 21 years and pray that we can find a solution that will be good for everyone. Unfortuantely, with the current governor, I do not hold out much hope.
How sad that we as residents of the State of Florida are at the mercy of a man-made catastrophe! Perhaps I misunderstood from history classes, civics classes and political party training at the local level, but I was under the impression the Governor of the State was entrusted with seeking the best for all the citizens….How does it appear the current governor is seeking from only his vantage point. And how rude of him to make remarks about State Farm as a whole! Does he not note the taxes paid by State Farm? The taxes paid by businesses supported by State Farm? By taxes from the individuals and corporations and congregations which hold those 1.2 million policies….? Many of those individuals will be closely examining other candidates in future elections. For the hundreds of us as State Farm policyholders who wrote checks for Mr. Crist’s campaigns in the past….Save your postage, Mr. Crist. Don’t ask me for anything. I see how you are. Go ahead, feel free to return the money I sent you for the last campaign; I made a mistake.
Good riddance?
Does Governor Crist have any idea what chaos and disorganization there will be in the State of Florida when the next hurricane hits?
State Farm has taken on the risk of a million homes in the State (have I misread that) and Governor Crist says ‘good riddance?’
State Farm Insurance company are good business people. There is no way you can run an organization with losing more than you take in, and running the risk of not being able to pay the claims in a catastrophic time.
State Farm will not be in line for a bail out from Washington, but the state of Florida might be!
Governor Crist, you need to first of all, apologize not only to State Farm, but to the people in the State of Florida for your remark and attitude. And then, you should let the free market decide if they want to pay more for the best insurance in the Florida (and in the nation). Let the people of this beautiful state decide who will write the insurance on their home, not you.
Oh, by the way, I made a huge mistake, and I publicly apologize. I voted for you in the last election.
I am and elemetary school teacher and also a current State Farm policyholder. I was very shocked and surprised by the unprofessional comment made by Charlie Crist on the news program. I have been a faithful customer of State Farm for over 17 years and would like the opportunity to decide on my own whether it is worth it to pay higher prices in order to insure my home. I am glad to see that we are finally hearing the other side of the story instead of constant negative publicity. What people need to understand is that you renew your policy per year. If you pay 1,000 dollars for your yearly premium, that in turn, if faced with a catastrophe, could rebuild what you have worked for all your life. I would be willing to pay an extra 47 percent to insure that.
What people do not realize is that this is not just about insurance. State Farm is a leader in our community and places the highest value on helping our young children and education. At the elementary school where I work, we have quite a few mentors that take their time to come to our school to read with, and encourage our children, our future. I hope everyone takes action and realizes what an impact this could have on our situation in our state but mostly our county. By Charlie Crist Saying what he did, it was more like he was saying, I don’t care about the thousands of people that rely on State Farm not only as an insurer but as an employer as well.
As far as I am concerned I hope the next election we can all say “Good Riddance” Charlie Crist.
The State of Florida must have a very short memory. In 1992 when all the other insurance providers could not pay their claims, who was there? In 2004 when all those hurricanes came through, who was there?
It seems like most people have forgotten that. Where would Florida be if State Farm wasn’t here in 1992 and 2004? I guess we will find out real soon….
I totally agree with you and I am sad to see what will happen to my home if I have to insure with some rinky dink insurance agency that doesn’t have the reputation of State Farm. My husband works in the insurance industry and we saw a lot of unpaid claims by other companies. I personally would rather pay a little more for the peace of mind that my home would be covered in case of a catastrophe. State Farm has an awesome reputation of paying their claims. It will be a sad day in Florida when they push them out of the state.
Copy of my letter to Crist:
Dear Governor Crist:
Your cavalier attitude toward State Farm Florida leaving the state reminds me of President Bush’s “Bring it On”.
You say you want to bring clean, thriving businesses to the state and raise employment rates with high level jobs; yet, you effectively push out a clean company with the highest national reputation that employs many people and provides unequaled service to hundreds of thousands of Floridians.
You replace this with Citizens, a state subsidized company that cannot pay its claims and depends on assessments made on State Farm and other legitimate insurance companies. Check out your State Farm policy. You are right now being assessed because Citizen’s couldn’t hack it. I thought Republicans believed in less government and the free market. If State Farm is such a bad company, why are they rated so highly and why do so many policyholders stay with them?
Hurricane Andrew bankrupted State Farm Fire and Casualty which had to be bailed out by State Farm Mutual and led to the establishment of State Farm Florida. The 2004-2005 hurricanes bankrupted State Farm Florida which had to be rescued by State Farm Fire and Casualty.
What part of this rate failure can you not understand?
Unlike the state’s Citizen’s Insurance and the small startup companies that are springing up, State Farm doesn’t like to make promises it can’t keep. Neither do they get to assess someone else if their rates aren’t sufficient.
Doesn’t it seem likely that if State Farm Florida were thriving on the present rates, they would stay and rake in the money?
Your swagger and pandering to the public who will always want something for nothing is the mark of a politician, not a leader.
I can only hope we have some leaders in the legislature who will recognize the danger and change the course of this insurance mess you have made.
Sincerely,
Fannie R. Griffin
Very good article that I support. As a policyholder I would support a rate increase rather than having SF leave the state. Let the free markets decide the rates. Allow competition. Gov Crist and Commissioner McCarty need to get off their political platforms and listen to the people you SERVE! We are already deep in a hole, but don’t bury us completely!
PEOPLE EITHER FORGET OR DO NOT KNOW THAT PREMIUMS DO NOT PAY CLAIMS. THE CLAIMS ARE PAID FROM INCOME FROM INVESTMENTS. HOW GOOD HAS THE STOCK MARKET BEEN TREATING US LATELY?
ALL OF US, INCLUDING STATE FARM ARE TAKING A BBEATING ON WALL STREET.
A PREMIUM INCREASE IS NECESSARY TO MAKE UP FOR THE SHORT FALL OF THE STOCK MARKET.
I am a State Farm Agent who paid out over 200 million dollars in Homeowner and Business claims after Hurricane Andrew. This doesn’t even count what was paid out in auto claims from my agency. State Farm has been there when other companies bailed. Since State Farm is part of the guarantee fund, we also picked up a portion of the unpaid claims of other companies when they left their customers without coverage. I would encourage the public to get educated on the “real” truth. Reform is needed and I hope the government, particulary Gov. Crist will wake up and realize the long term effect on the residents of Florida.
I don’t agree. I and my family have had State Farm Insurance for over 60 years. I’ve talked to a lot of other SF policyholders and they are of the same opinion – if State Farm drops our homeowners’ insurance, we will immediately drop all other forms of insurance we have with State Farm. I’m sorry that the actuaries couldn’t handle their jobs and foresee the coming problems – they should have. Similarly, the auto makers should not be bailed out with our money because they could not handle their businesses – same deal. Bottom line – we, the little guys, always lose. The U.S. government gave us $600 of our money – big deal! Now our insurance companies are pulling out, Progress Energy has raised rates 25%, cable and water are going up – what’s next?
We have been State Farm customers since 1979 and believe they have operated in good faith with us in all matters. However, using the 2004 Hurricane season as a basis for setting rates is self-serving. From an actuarial point-of-view, 2004 was an anomaly and using it as a leveraging device is unfair. Sound business practices are based on long term investment and return not on a single hurricane season…State Farm has had many profitable years. In the end, I agree that that Governor Christ should let the market decide if what State Farm is charging is fare.
Amazing to me that The GOVENOR is trying to force a private company to operate like our government; Just ignore the facts and continue to write policies even though you will not have enough money when needed; maybe he thinks they should just print more money like our government and let ALL taxpayers pay it. Get a clue-State Farm is trying to be a responsible business. Stay out of the business that STate FArm has been successful at for over 80 years!
It’s been said that State Farm is like a rat jumping off a sinking ship. I beg to differ with you, it’s more like State Farm is the sinking ship and you “the people” are jumping off like rats.
Instead of placing blame on State Farm, why don’t you make the effort to contact your Governor Charlie Crist, who by the way IS a State Farm policyholder (so it must not be that bad) and tell him what a mess he has put this State in. While your at it, contact Insurance Commissioner Kevin McCarty, who by the way IS a State Farm policyholder (so it must not be that bad) and tell him what a mess he is making by being the YES MAN to Charlie Crist.
When State Farm leaves the State it will be everyone’s problem, not just the State Farm policyholders that are left to find other coverage. Those who already have coverage elsewhere will find themselves paying more in premiums because State Farm has pulled out. Think about all the money State Farm pays for the States CAT (Catrostophe) Fund, the surcharge they (their insured’s) pay per auto and home policy so that Citizens can afford to pay their bills because Citizens doesn’t have enough money to pay their own.
Who do you think the State will turn to in order to replace these funds??? YOU, the precious people of the State, who are insured elsewhere. With State Farm not being in the business, someone will have to take up the slack, and you my friend(s) are it.
Charlie, the State Farm people were good enough for you while you were in their office politicing on several occasions) and even good enough for you to have your insurance with them. So why now Mr. Crist, is it that you have such a problem with them? Your unprofessional flippant response of “good riddance” is uncalled for. You’re the one that has caused this mess and if the citizens of the State could take back their votes you would not be sitting in that office. Stop running for your next office and fix this insurance crisis!!! Why don’t you let them have their rates so that WE the people can decide who to place our insurance with? Better yet, fix the damaged market by pulling wind out of the policy and offering a State run wind policy.
Instead of placing blame on State Farm, why don’t you make the effort to contact your Governor Charlie Crist, who by the way IS a State Farm policyholder (so it must not be that bad) and tell him what a mess he has put this State in. While your at it, contact Insurance Commissioner Kevin McCarty, who by the way IS a State Farm policyholder (so it must not be that bad) and tell him what a mess he is making by being the YES MAN to Charlie Crist.
When State Farm leaves the State it will be everyone’s problem, not just the State Farm policyholders that are left to find other coverage. Those who already have coverage elsewhere will find themselves paying more in premiums because State Farm has pulled out. Think about all the money State Farm pays for the States CAT (Catrostophe) Fund, the surcharge they (their insured’s) pay per auto and home policy so that Citizens can afford to pay their bills because Citizens doesn’t have enough money to pay their own.
Who do you think the State will turn to in order to replace these funds??? YOU, the precious people of the State, who are insured elsewhere. With State Farm not being in the business, someone will have to take up the slack, and you my friend(s) are it.
Charlie, the State Farm people were good enough for you while you were in their office politicing on several occasions) and even good enough for you to have your insurance with them. So why now Mr. Crist, is it that you have such a problem with them? Your unprofessional flippant response of “good riddance” is uncalled for. You’re the one that has caused this mess and if the citizens of the State could take back their votes you would not be sitting in that office. Stop running for your next office and fix this insurance crisis!!! Why don’t you let them have their rates so that WE the people can decide who to place our insurance with? Better yet, fix the damaged market by pulling wind out of the policy and offering a State run wind policy.
The catastrophe coming to Florida will be worse than anything a Hurricane could cause. Florida’s politicians are busy creating an unnatural disaster in their state insurance market that will blow away taxpayers when the next big hurricane hits. And I mean ALL taxpayers across America.
Last month State Farm Insurance pulled the plug on its 1.2 million homeowner policies in Florida, citing the state’s punishing price controls. State Farm the state’s largest insurer joins a raft of competitors that have already reduced or dumped their property and casualty business in the Sunshine State, including Prudential, Allstate, Nationwide and USAA. This is the inevitable result of Governor Charlie Crist’s drive to control property-insurance premiums. The Republican also lobbied his GOP legislature to make the state government run Citizens Property Insurance Corp a giant competitor in the market insuring approx 50% of the homes in the state, undercutting private insurers and allowing Citizens Property Insurance Corp to levy assessments at will on the private insurance companies to pay for it’s losses since it is woefully rate inadequate. It’s Socialized Insurance and driving the cost up for everyone.
State Farm’s local subsidiary recently requested an increase of 47%, but state regulators refused. State Farm says that since 2000 it has paid $1.21 in claims and expenses for every $1 of premium income received. Since January 2008 alone, the company’s surplus has fallen to $621 million from $820 million. Every month in Florida, State Farm loses $20 million. So it finally said, No more.
Meanwhile, Floridians have been signing up with Citizens Property Insurance Corp., the state-run insurer that Mr. Crist unleashed in 2007. Because it has an implicit taxpayer guarantee, and because its actuarial assumptions are, well, extremely loose, Citizens can offer lower premiums than private competitors can, then tax private competitors for it’s financial shortcomings. Citizens has become the largest insurer in the state, with 1.1 million policies.
Mr. Crist has thus guaranteed that Floridians, rather than the global insurance industry, will be on the hook for property damage when the next Katrina hits. Citizens is facing more than $400 BILLION in potential exposure now without taking on State Farms 1 million policies, yet Citizens Chief Financial Officer Sharon Binnun was recently cited in the South Florida Sun Sentinel as saying it had only $3.4 billion in net assets. Anxious to keep voters happy, legislators have frozen Citizens premiums the past three years.
Some 25% of the coastal property in U.S. hurricane zones is located in Florida, and another storm is inevitable. To pay for those claims when they come, Mr. Crist will either have to raise taxes on Floridians (approx. $20,000 for each FL tax payer) , or beg Congress for a rescue. Mr. Crist tried the latter in 2007 when he pushed federal legislation to distribute below-market loans to state insurance programs and create a federal reinsurance body to backstop undercapitalized states.
Even the Governor may be catching onto his folly. While dismissing State Farm’s exit — “Floridians will be much better off without them” — he is pushing for a law barring the company from dropping more than 2% of its customers in a single year. So, having publicly brutalized State Farm, undercut its business and set its prices, Mr. Crist now wants to require it to keep losing money. Yet this will not stop State Farm Florida from becoming insolvent. Once that happens the state will have to step in and at tax payers expense cancel or handle the bankrupt companies policies.
State insurance regulators are increasingly confident that there could be enough private companies, already working in Florida or eager to enter this market, to take on the policies shed by State Farm Florida Insurance. Belinda Miller has been checking with these companies since State Farms announcement, Blinda is the state’s deputy insurance commissioner, who has been fielding calls from interested insurers. “The reason is, this is desirable business.”
Among the companies willing to soak up State Farm policies are:
Security First: up to 50,000 home and condo policies.
Edison Insurance: 10,000 to 20,000 policies with windstorm coverage, including South Florida
ASI Group, which includes four companies: 100,000 policies throughout the state; without windstorm coverage in coastal areas.
Capitol Preferred/Southern Fidelity: 100,000 policies throughout state with windstorm coverage.
50,000 + 10,000 + 20,000 + 100,000 + 100,000 =280,000 Hummm…. That number seems about a 1 million short. Maybe the State uses a new math we don’t yet know about. Probably the same math they use to figure out what State Farms insurance rates should be apparently.
Let us also remember that after Hurricane Andrew hit Florida that 11 insurance companies went bankrupt, insolvent, and folded. Most were unknown companies like the ones in the above list. Others had been around for decades like Bankers and Ocean Casualty. I for one do not want my home that houses my family, my loved ones in the hands of someone who is here today and gone when I need them most. Because as anyone who lived through Andrew and it’s aftermath knows, people who were insured by those 11 failed companies were lucky if they got 25% of what they should have gotten when the government settled with them. Not enough to rebuild let alone anything else. Next time your in South Florida take a drive in Homestead and Florida city. Those bombed out looking buildings you see are the ones people left because they could not rebuild with the pittance they got from the gov’t. Also if you look real close you’ll still see the faded paint of the names of those failed insurance companies spray painted on the homes as everyone was instructed to do after Andrew.
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 “insurer of 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. The customers choose who they want insurance from and if it’s to high a price they take their business elsewhere. It’s called the FREE MARKET system. Something FL Republicans once claimed to support or at least did while Jeb Bush was Governor. Jeb had the courage to do what was right even when it was not popular.
It’s scary to imagine the bill taxpayers will get when the next big hurricane hits Florida.
“They have sown the wind, and they shall reap the whirlwind”
Hosea, Chapter 8, Verse 7
Examples of the generosity of State Farm employees and their company are known to many of us. No matter how many acts of generosity that we have witnessed, many more profound contributions have been made behind the scene.
The positive impact of State Farm reaches far beyond the business of insurance.
I will try and let you see my perspective on this….When I had an expensive sports car (by choice)I knew going in with my eyes wide open that everything associated with that car was going to be expensive, parts, service, tires and YES insurance. It was a conscious choice I made, not only to make the monthly payments on the loan, but the insurance as well. the car was valued at approx. $45,000.00 and my premium was approx.$1200.00 a year or about 3.5% of the payoff of the vehicle in the case of a total loss,and that is just to replace the vehicle, not to mention, heaven forbid any medical payments or liability coverage. Actually a very good deal considering the risk the insurance company is assuming.
NOW lets talk about my homeowners insurance all told with all of the endorsements if my house burned to the ground or was completely destroyed including ALL of my contents the insurance company would pay out approx. $180,000.00 My premium for this service is approx. $1350.00 per year or WAY less than 1% per year for the insurance company to assume this risk, WHAT A DEAL! So you have a $400,000.00 home, sit down and figure out the ratio of insurance cost to the amount of risk (or payoff)and don’t to forget to include the contents of your home which is typically 50% of the value of the home, and I think your eyes will be opened too. I think if you look at the true value homeowners insurance is, people would stop the moaning over the cost of insurance, it is really a pittance compared to other monthly or repeating bills we have. I agree with the folks above, let the free market system determine the rate, we don’t tel Wal Mart what to charge, nor do we tell any other merchant how to price their goods. Price your goods at what the market can stand. Remember, long gone are the days when houses did not have a habit of getting up off their foundation and running into each other, our recent bouts with hurricanes in the state took care of that. I too long for the days when my homeowners insurance was only $365.00 a year, along with a $37.00 electric bill and a $19.00 water and sewer bill. Support ALL insurance companies in the battle with the legislature, and support a Florida wind pool or FHPP fund, it is the only way to keep a free and healthy insurance market in this state with the HURRICANE risk all of these companies are assuming. In closing remember this, ANY company can sell you a sheet of paper promising to pay for your destroyed goods when loss time comes around, but will they have the financial strength to make good on that promise if and when it does happen?
State Farm does and will.
The 3 or 4 times I have needed state farm they have been there for me, no questions ask. Plus I would like to be the one to decide if the rates are to high. NOT THE GOVERNER.
I support Gov. Crist. If the private sector is unable or unwilling to meet insurance needs i would favor a state run program with profits coming back to THE PEOPLE.
I HAVE HAD STATE FARM INS FOR 35 YEARS HAVE ALWAYS BEEN TREATED FAIRLY LET ME DECIDE IF MY HOMEOWNERS INSURANCE IS TOO HIGH JUST LIKE WHO TO VOTE FOR IN THE NEXT ELECTION
I’ve been int he insurance business for only 8 years and worked with other companies that you needed them…..oops…. you were on your own. They didn’t want to pay pip claims or nothingelse.In the years I’ve been working for State Farm I haven’t seen that. State Farm is one of the best companies in florida and I haven’t hear a compaint about them paying claim.I really believe that we all should take action and don’t let this Governor Crist destroy more of the insurance market.
Think about this….at least State Farm didn’t ask the government to bail them out. I think they are doing what they need to do to keep a healthy company. It is not just Florida that they service. Hopefully more thought will be given to this by our officials.
To Bill Allen:
Insurance companies are not ‘unwilling or unable’ to provide insurance. They are privately owned, privately run, businesses Mr. Allen. They don’t operate on non-profit; No matter what company insures your home, let’s hope they can PAY the bill when you need them; State Farm is responsible when they keep their promise to pay their bills; How long would any company stay in business when they pay out more than they take in? Just research the facts sir, before you so readily accept socialist insurance; The State of Florida will certainly NOT watch your dollars and spend them wisely! Let the people make the choice; you choose Citizens if you’d like; I’ll choose State Farm.
How can anyone say they want the profits of Citizens to come to the people? citizens, as far as I can remember, has received money from us, the taxpayers at least once, because it was not able to make a profit on the huge premiums it takes in. Citizens is a joke but ripping us off. It looks as if state realizes that State Farm rates are too low but FL does not want to admit that a 47% increase is justified. I would still be ahead if they raised my rates by that amount based on my investigation of alternatate rates available when I have to switch. State should not be involved in pricing of property insurance. We have competition to stabilize rates. State can’t balance its own budget so how can they judge what is a fair profit for State Farm to make. I want State Farm to have a huge surplus to be able to pay our claims when they occur. People who think otherwise are drinking too much cool aid from the biased and incorrect state officials who are covering up their incompetence. This problem started when Bill Nelson (yes the Socialist Bill Nelson) was insurance commissioner. We are now losing from his errors of judgement.
Note: This is a copy of the email I sent to Crist and other elected officials. “As a long time policy holder I recommend a good old sit down session with State Farm is in order and everything needs to be on the table. Prior to the session all emails to you regarding State Farm’s decision to pull out of the property insurance market in Florida should be weighed for the “pro and con” count so you have a clearer idea of what the policy holders want/wish the state to do.
It goes without saying no one wants a rate increase on anything at anytime but somehow we learn to “suck it up” or take our business elsewhere. This should also apply to State Farm. The company should “suck it up” or leave Florida and by that I mean stop selling any of their wares in this state if it is impossible to reach a compromise agreement. There must be a compromise somewhere and all policy holders should be polled regarding any offers on the table from State Farm and the State of Florida.
Out of the sit down session should come a list of compromise items and this list should be mailed to all policy holders (both auto and homeowners) for a vote. Those that care will fill out the form and mail it back even if they have to lick the stamp. Those that don’t care have already moved their policies.
I may be way off base but I believe most policy holders do not shop for insurance every week like they do for groceries. Once they select a company they stay with it for years. If the rates go up for the most part we budget for it the same as we budget for our weekly groceries. Home and auto insurance are as necessary as food on the table.
We also need to be wary of losing a “Good Neighbor” who does not pollute the air we breathe the way some other businesses may do.
Let us do some more compromising! I am ready to be a volunteer.”