EDITORIAL: New policy for State Farm
Palm Beach Post Editorial
Wednesday, July 22, 2009
It’s time for State Farm Florida to threaten less and negotiate more.
On Tuesday, the 1st District Court of Appeal in Tallahassee affirmed the decision by an administrative law judge last December to reject State Farm’s 47 percent statewide rate increase. The judge had upheld the Office of Insurance Regulation’s rejection of the rate increase.
When the state denied that 47 percent increase – after granting State Farm a 52 percent statewide increase in 2006 – the company announced that it would withdraw from the Florida property insurance market. That move would be a big deal, since State Farm, even after dropping many customers, still writes almost 1 million hurricane policies. Only state-run Citizens writes more.
But insurance regulators set terms for that withdrawal. State Farm could not dump any policies into Citizens. State Farm agents would have to write coverage for other private firms, as Allstate and Nationwide agents did after Hurricane Andrew in 1992. State Farm struck back in two ways. The company appealed those terms and lobbied the Legislature for a bill that would let large private insurers charge whatever rates they wanted.
The Legislature passed the bill, but Gov. Crist correctly vetoed it. Meanwhile, the Office of Insurance Regulation didn’t budge. And now two courts have agreed that 47 percent was too much. A hearing on State Farm’s appeal of the withdrawal terms is set for October, but a much better development would be for State Farm and Insurance Commissioner Kevin McCarty to settle the dispute. That could involve a smaller rate increase or State Farm dropping some policies but continuing to write hurricane coverage.
"Discussions on the withdrawal plan are continuing," said a spokesman for Mr. McCarty. They should continue until there’s a deal, not another court date.