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Betting The (State) Farm

Betting The (State) Farm 

Published: Wednesday, June 24, 2009 at 12:01 a.m.
Last Modified: Tuesday, June 23, 2009 at 3:46 p.m. 

Before the week has ended, Gov. Charlie Crist is going to make a lot of people mad – no matter what he does with HB 1171, the "Consumer Choice Act" that would loosen the rules for writing property-insurance policies.

Ever since the first of the year, State Farm Florida has been saying it will stop writing property-insurance in Florida. Refused rate increases by the state, the company said its financial position is deteriorating. That would mean a loss of insurance for homeowners and business owners – about 1.2 million policies statewide.

Signing the bill would give those policyholders the hope that State Farm would be encouraged to keep going because it, and other well-funded companies, would have less regulation of rates.

But since the bill lets companies determine some rates without regulatory approval, opposition has arisen from consumer groups, including the National Consumer Federation, which called the bill "an invitation for insurers to game the Florida regulatory system and abuse consumers. No price can be too high …"

Polk County has a rather large dog in this fight – and it’s not just the 46,000 policy holders who buy their insurance from State Farm. The company’s Florida operation, headquartered in Winter Haven, could cut about 500 of its 1,700 jobs if it stops offering property-insurance coverage.

It goes deeper than that. State Farm gave more than $136,000 in donations during the last 18 months to local groups like Girls Inc., the Lake Wales Care Center, Friends of the Winter Haven Library, and Junior Achievement. "It’s so big that we really couldn’t have Junior Achievement without State Farm," Lily Romine, JA’s executive director, told Ledger staff writer Merissa Green.


There are around 300 State Farm employees who serve as volunteers in the Polk County school system, said Margaret Anne Wheeler, the district’s senior coordinator of community involvement.

United Way agencies have received millions of dollars over the years from State Farm and its employees through payroll deductions, said Terry Worthington, UW’s executive director.

Having said all that, there are bigger issues than donations, jobs, and voluntarism. Those issues – including expanding consumer choice and encouraging insurance companies to do business in Florida – are the reasons Crist should go ahead and sign the bill, or let it become law without his signature if wants to distance himself from it.

Given his desire to project a populist image (did we mention he wants to be the next U.S. senator from Florida?), the thinking has been that Crist would say he was protecting consumers from arbitrarily policy increases and veto the bill. If State Farm dropped a million policyholders because of that, so what? Smaller companies will get the business.

But within the past week, State Farm officials let Crist know that they would "re-examine their options" if Crist signs the bill. "Property insurance customers from all across the state have made it clear that they want the option to decide for themselves whether the price their insurer asks is a fair price," wrote Jim Thompson, president of State Farm Florida, in a letter to Crist.


And that is where competition comes into play. "If you don’t want to pay the rates by a deregulated company, then shop somewhere else," Kathy Fain, a Tallahassee State Farm agent, told Capitol News Service. "Go somewhere else." When there aren’t many other choices, regulation is needed to make sure consumers are treated fairly.

State Farm has not received a single rate increase from state regulators since Crist became governor in 2007. It has been ordered to make three decreases totaling nearly 10 percent. State Farm Florida said it has paid out $1.21 in claims for every dollar of premiums it has collected since 2000. Its net worth had dropped by nearly 25 percent since 2006 even with no major disasters.

Consumers need to know they’re getting unregulated prices when they are shopping. Legislators need to make sure companies don’t push policy holders into the already burdened state-run Citizens Property Insurance Corp.

There’s no guarantee that State Farm will continue to write property-insurance policies in Florida if Crist signs the bill, and no guarantee policyholders will stay with State Farm if it increases rates.

Crist should let the bill become law, however, and give them the chance.