Florida agents hope State Farm can stay in-state
NORTHEAST FLORIDA — State Farm Florida agents and industry leaders said the area’s largest home insurer is nearing a deal with Florida regulators that would allow the company to maintain about one-third of its homeowners policies in Florida.
The Office of Insurance Regulation’s Insurance Commissioner, Kevin McCarty, has said he is “cautiously optimistic” an agreement would be reached.
The fact that a formal hearing has been put off four times to Jan. 25 to give both parties more time to make a deal is also an encouraging sign, insurance agents said.
The agreement could include State Farm keeping about one-third to one-half, or 300,000 to 400,000 of its homeowners policies in Florida. The insurer is the second-largest in the state next to Citizens Property Insurance Corp. with 815,253 policies in the second quarter; and the largest insurer in Northeast Florida, according to the state regulator.
A rate increase would also be inevitable as the insurer would need to cover its exposure to remain solvent, though it would not be near the 47.1 percent average rate increase request State Farm made in 2008 and was denied in January, sources said. State Farm agents said they have heard a rate increase would be more like the up to 10 percent increments year over year that Citizens was requesting.
Both the regulator and State Farm Florida representatives would not comment on details and the status of the deal but said negotiations were ongoing. The Business Journal spoke with several agents and industry leaders throughout Florida who asked not to be named because of concerns they would be reprimanded by State Farm’s corporate office.
“I think the fact that negotiations continue and both parties have been agreeable to postponing numerous court dates is suggesting that they are finding ways other than to leave,” said Bob Lotane, director of communications and political affairs at the Florida Association of Insurance and Financial Advisors. “McCarty’s comments saying that Florida would be better off with some State Farm presence is also encouraging.”
Though there was nothing in State Farm’s original withdrawal plan to place the policies with other carriers aside from Citizens, sources were hopeful that some of the nonrenewed policies would be broken up with other carriers in equal pools so insurers could not “cherry-pick” the safest areas and the state’s largest homeowners’ insurer, Citizens, would not be inundated with former State Farm policies.
“I wake up every morning hoping an announcement will be made by the end of the day,” said Jacksonville State Farm Agent Matt Carlucci. Though Carlucci said he could not speak for the corporate office or to the deal, he was hopeful an agreement would be met to allow a “soft landing” for policyholders so they could either stay with State Farm or carry over to other insurers and the agents could maintain their book of business.
Sources said since Jacksonville is considered a less hurricane-prone area, its risk exposure is less and so the policies would be more attractive to any insurer.
“If they [State Farm] had a choice or any [other carrier] had a choice, that would be an area they would prefer to maintain some exposure in,” Lotane said.
Even if State Farm kept 300,000 to 400,000 policies, it would still be among the top three insurers in the state, according to the 2008 market share report from insurance regulators. With that much exposure, sources said State Farm would still need to increase its rate. They were hopeful that State Farm might be approved for a rate increase because the regulator has approved rate increases for other homeowners’ insurers this year that have less exposure in the state and State Farm was approved to remove some of its discounts to policyholders recently.
Twenty-two insurers have been approved for homeowners’ policy rate increases so far this year, according to the Office of Insurance Regulation. Six of Northeast Florida’s 10 largest insurers have been approved for a rate increase and two were approved for a decrease.
Office of Insurance Regulation Deputy Director of Communications Tom Zutell said the uptick in approvals is largely because of increased reinsurance costs due to changes by the Florida Legislature this year that caused insurers to seek reinsurance from the private market rather than an extra layer in the Florida Hurricane Catastrophe Fund. Private reinsurance costs have increased about 15 percent from last year.
rwitkowski@bizjournals.com | 904-265-2219