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Florida Approves State Farm Pullout Plan, With Conditions

Florida insurance regulators have approved State Farm Florida's plan to stop writing property insurance in the state, but there are conditions. Insurance Commissioner Kevin McCarty's...
February 18, 2009

Florida insurance regulators have approved State Farm Florida's plan to stop writing property insurance in the state, but there are conditions. Insurance Commissioner Kevin McCarty's order calls for the company to allow its more than 800 agents to sell policies for carriers other than insurer-of-last-resort Florida Citizens Property Insurance Corporation. State Farm Florida will also have to pay for an advertising and communications program to help policyholders find another insurer. State Farm Florida has three weeks to review the order and decide whether to accept it or ask for a hearing before the Division of Administrative Hearings. If the company accepts the conditions, it will have to give up its operating certificate within 30 days. Commissioner McCarty says his office is in discussions with at least 15 Florida-based companies that are interested in taking State Farm Florida's policies.

The pullout of State Farm would affect its 1.2 million property insurance policies in the state, including homeowners, renters, condo-unit owners, personal liability, watercraft, personal articles, and business property and liability policies. Despite no hurricanes, State Farm says it lost $201 million in surplus in the first three quarters of 2008 and continues to lose an estimated $20 million a month in Florida. The company made its announcement of its intention to leave the Florida market after state regulators denied a rate increase request. After it made the announcement, State Farm quickly reassured other Gulf Coast states that it did not plan other exits.

"The announced exit of State Farm can't be looked upon as a good thing," said PIA of Florida executive vice president Mark O'Connell. "Sure, it's an opportunity for all of the other homeowner companies to pick up the business that State Farm is leaving behind but what does this really do to the market? For several years our state leaders have tried to redefine the natural laws of insurance with predictable results -- our insurance market is a mirror image of the national economic situation. Take State Farm out of the mix and we have to wonder how that affects private market capacity and how the remaining companies can influence private market conditions enough to stimulate real movement away from Citizens [the state-owned carrier]. Unfortunately, we won't really know what this means until it's too late to do anything about it. When did competition become a bad thing?"

McCarty Sets Tough Conditions for State Farm Pullout (National Underwriter 2/13/09)

State Farm Allowed to Pull Out (Miami Herald 2/17/09)

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