While their ads insist that "Like a good neighbor, State Farm is there," in Florida the carrier is behaving more like Clint Eastwood’s character in "Gran Torino"—brandishing a deadly weapon and warning everyone to get off his lawn.
State Farm gave the public yet another reason to distrust insurers by announcing it would pull out of Florida’s homeowners market, leaving over 1.2 million clients up the creek, shortly after its request for a 47.1 average premium increase was turned down. (For NU coverage of the pullout, click here.)
While State Farm has good reasons to insist on reforms in the Sunshine State’s dysfunctional insurance market, its take-it-or-leave-it ultimatum—give us this monster hike, or we’ll be the ones taking a hike—undermines what’s left of the industry’s already lousy reputation for fair play.
The size of the proposed boost and the speed of State Farm’s reaction to its rejection suggest the carrier was seeking an excuse for confrontation. If so, it was a self-destructive, self-defeating strategy.
Compounding the reputational damage to the industry was State Farm’s response to a common-sense suggestion by Florida Chief Financial Officer Alex Sink to allow its captive agents to market replacement policies for rival carriers so their clients can more easily secure alternative coverage.
As reported by our own Dan Hays, Ms. Sink wrote State Farm Florida’s president, Jim Thompson, that given the carrier’s intention to leave the state, “I find it inappropriate to limit your agents’ ability to help your customers find the best possible property insurance coverage.”
But State Farm slammed the proverbial door in her face. “We appreciate CFO Sink’s concerns, but at this time we are not considering any option to allow any of our agents to become brokers,” said a company representative. (Click here for the full NU story.)
State Farm should reconsider. It’s the least the carrier could do—not only to help the policyholders they’re dumping, but the captive agents who are having the rug pulled out from under them.
The only positive to come out of this grim development might be for independent agents, who will be flooded with refugees from the captive agency world, as policyholders jump the sinking State Farm ship seeking lifeboats from other carriers.
Indeed, this situation reinforces the independent agent’s sales pitch going all the way back to the classic Big I ad campaign back in the 1980s, featuring Raymond Burr, which urged consumers to do business with “the more than one company agent.”
Looking at the bigger picture, however, in the public’s eye this is just another example of how insurers go out of their way to abandon policyholders the moment the going gets tough.
No one is disputing the fact that doing business in Florida is no picnic. State political leaders—urged on by those voting them into office—have been accused of artificially suppressing rates, thus discouraging the healthy market required to keep national homeowners carriers on board.
By putting short-term political interests ahead of the state’s long-term financial stability, the government perhaps drove State Farm--Florida’s second-biggest carrier--to desperate measures.
Still, there had to have been a better way to handle this. State Farm’s officers, instead of delivering an ultimatum, should have taken their case directly to the public—via message advertising, televised town hall meetings and sit-downs with newspaper editorial boards—to justify big rate hikes and prepare the public for the consequences should the numbers come up short.
Instead, State Farm comes across as selfishly precipitating this crisis, leaving millions out in the cold. What kind of neighbor does that?
What do you folks think?
