In an unusual action, the head of a small, rival carrier has issued a statement slamming the decision by insurance giant State Farm to drop its Florida property business as “disgusting.”

The critical comment from Mike Gold, chief executive officer of Boca Raton, Fla.-based Peoples Trust Insurance Company, was coupled with an announcement that he and Florida officials will shortly unveil a plan to fix the state's insurance market.

His comments followed State Farm's announcement yesterday that a “weakened financial position” was forcing it to stop selling homeowners insurance after its request for an average 47.1 percent rate increase was denied.

State Farm, Florida's largest private property insurer, said that within two years it will phase out more than 1.2 million home and condominium policies.

Mr. Gold said it “is absolutely disgusting what State Farm is doing, abandoning Florida homeowners after profiting for years on their policies.”

He added that “if they don't want to partner with the state's consumers on property insurance, they ought to be good corporate citizens and get out completely. Our industry has specific customer obligations, and my feeling is they should be all in or out.”

According to Mr. Gold, his firm “charges roughly half of what State Farm collects for the same policy and still makes money.”

Peoples Trust, he said, has “a catastrophe plan to help fix the system they claim to be unable to work in, which we'll unveil in a few weeks, that has the strong support of Florida Gov. Charlie Crist and Insurance Commissioner Kevin McCarty. It is the kind of creative thinking this industry desperately needs–something State Farm wouldn't or couldn't bring to the table.”

Jim Thompson, president of State Farm Florida, in a statement yesterday said the insurer was making the move “given the realities of the Florida property insurance market.”

Company operating costs, he said, “have risen as day-to-day claims have increased, both in their number and severity. State-mandated discounts have further reduced needed revenues. During the first three quarters of 2008 (a year with relatively modest catastrophe impact and no major hurricane), State Farm Florida saw its surplus reduced by $201 million.”

Asked if the company had any reaction to Mr. Gold's statements, spokesperson Michal Connolly said: “We don't necessarily have a response.”

Regarding Mr. Gold's comments that his firm can make money in the Florida property insurance market, she said she would not speak for another company, but “our financial picture speaks for itself.”

The firm's message to customers, she said, is that the pullout was a hard decision and not one the company wanted to make. “We tried everything, but faced with the bleak financial picture,” State Farm did what they felt was necessary, she added.

Commissioner McCarty yesterday said that the Office of Insurance Regulation has 90 days to act on State Farm's pullout plan, and that if approved, State Farm must then provide 180 days notice to customers before any policies can be non-renewed.

Mr. McCarty mentioned that his office has been working with state Sen. Mike Fasano, R-New Port Richey, to develop legislation to significantly limit the number of non-renewals a company can issue in a year.

Belinda Miller, deputy commissioner for property casualty insurance said Mr. Gold had discussed his plan with the OIR, but details could not be released yet “I think it will definitely be a big change.”

She said Mr. Gold was an entrepreneur with “some interesting new ideas.”

This article originally appeared on the web site of National Underwriter, P&C, sister site to Claims Magazine. To read the entire article, please click here.

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State Farm Pullout from Florida Earns Criticism

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