TBO.com - TBO is Tampa Bay Online

State Farm clients needn't panic yet

ADVERTISEMENT

By CATHERINE DOLINSKI

cdolinski@tampatrib.com

Published: June 26, 2009

Updated: 06/26/2009 11:07 am

TALLAHASSEE - When Gov. Charlie Crist rejected a bill Wednesday that would have let national companies charge whatever they wish for property insurance in Florida, he said that it lacked enough consumer protections.

That veto, however, ensures that State Farm Florida will abandon the state's property insurance market, company officials said.

What happens now for State Farm's policyholders? Nothing - yet.

Early this year, after Insurance Commissioner Kevin McCarty rejected the company's request to raise its rates 47 percent, State Farm announced its decision to leave. The company submitted an exit plan, which McCarty rejected, calling it "hazardous" for policyholders.

The insurer then filed an appeal with the state Department of Administrative Hearings and still is negotiating with McCarty on a withdrawal strategy. Until the litigation or negotiations conclude, the company cannot take any action to withdraw.

Sen. Mike Bennett, R-Bradenton, who sponsored the deregulation bill in the Senate, says he's not convinced the company will leave.

HB 1171 would have kept more national carriers in the Florida market, giving consumers the option of paying more for the added security of coverage from such companies, Bennett argued. He insisted he did not file the bill for State Farm, which he accused of playing a game of chicken with the state by declaring it would leave.

"I think State Farm was running a bluff when it did what it did; I think the insurance commissioner was running a bluff when he did what he did," Bennett said. "I think they both lost. But I also think the Florida market is too large for them to walk away. ... These are smart people; I don't think they will leave the state of Florida entirely."

State Farm Florida spokesman Justin Glover reiterated the insurer's stance. "When you look at our deteriorating financial condition - we've lost $200 million in surplus since we filed for a rate increase last year, and the Florida company was recently downgraded by A.M. Best from a B plus to B there are some serious financial realities we have to face. What's most important to us is to meet our obligations to our current customers; that's exactly why we have to go forward with our plan."

Meantime, here are some points for State Farm policyholders to remember:

•State Farm might not drop any policies for 18 months. The Office of Insurance Regulation and State Farm must report on their negotiations by July 15 to the Department of Administrative Hearings, which will set a hearing if there is no agreement. There are more appeal options after that. OIR says it could be 18 months before State Farm starts dropping policyholders.

•So far, "dropping" means not renewing. State Farm has said it intends to drop its 900,000-plus property insurance customers over two years on their annual renewal dates rather than terminate policies early.

•Warnings to precede nonrenewals. State Farm will notify policyholders 180 days before their coverage ends.

•State Farm agents can't write policies for other private insurers. This remains a bone of contention for regulators, who are pressing State Farm to reverse this rule now that it is leaving.

State Farm does allow its agents to transfer policyholders to Citizens Property Insurance Corp., the state-run insurer of last resort. The company also will transfer policyholders to "take out" companies that agree to cover them in lieu of Citizens. Glover said State Farm agents will advise existing policyholders about other coverage options.

Reporter Catherine Dolinski can be reached at (850) 222-8382.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT