State Farm Expands Florida Coverage
Florida Correspondent
Tallahassee
State Farm Florida Insurance Company has announced that it will begin offering all-perils coverage to its existing Florida condominium policyholders that currently receive their wind coverage through the state's windpool.
The move comes as windpool rates increased a statewide average 30 percent as part of a five-year plan to increase overall rates by 96 percent.
The Winter Haven, Fla.-based company, which is a wholly-owned subsidiary of State Farm, began offering the all-perils coverage to its 29,000 existing condominium policyholders as of July 1, 2001. The coverage offer would eliminate a policyholder's need to obtain wind coverage through the Florida Windstorm Underwriting Association.
The FWUA covers the wind risk for some 425,000 policyholders along the state's coastline and barrier islands. As of June, the association had $94.2 billion in exposure and a probable maximum loss for a one-in-100-year storm of $4.8 billion.
State Farm decided to offer the coverage based on a number of factors, including the desire of agents and policyholders for an all-perils policy, according to a company representative, Lisa Weathersbee. She said the coverage would be extended to all current HO-6 policyholders with one restriction–in coastal areas, policyholders must live on or above the second floor and have shutters or laminated glass doors and windows.
She said the carrier has no plans to make a similar offer of coverage to residential homeowners located in FWUA areas.
Florida Insurance Commissioner Tom Gallagher was pleased by State Farm's decision, according to Tami Torres, a representative of the state insurance department. Mr. Gallagher believes carriers have the resources to accept more wind risk in the FWUA eligible areas, she said. "The commissioner has been frank since he took office that a single policy with no gaps should be the goal," Ms. Torres said. "He is pleased that State Farm has taken the lead on moving some of the wind risk back into the private market."
FWUA officials say they are pleased with State Farm's decision, although it likely will have little effect on the association's overall exposure or probable maximum loss.
State Farm Florida's action comes amid a number of changes in the market.
The Atlantic Preferred Insurance Company, a subsidiary of the Tampa-based Poe Financial Group, is seeking to be the first carrier to assume a number of FWUA policies by offering an all-perils policy to 36,200 condominium unit owners and 10,800 homeowners. The offer of coverage will make the policyholders ineligible for FWUA coverage.
Carriers providing the non-wind portion of the coverage sold to these policyholders will likely lose the account unless they are willing to provide all-perils coverage, industry observers say.
Agent groups have gone to court to stop the policy removals, arguing that it could penalize consumers, who may lose a multi-policy discount for insuring their car and home with the same company. The agent groups also are concerned over the forced loss of business.
The FWUA also is implementing the second year of a five-year rate increase based on a state arbitration panel's decision last year to award the association a statewide average 96 percent rate increase. Under the terms of the arbitration agreement, individual policyholder premiums were limited to a 20 percent increase in the first year, 30 percent the second year, and 40 percent in subsequent years, until the approved rate level is achieved.
The rate filing also includes broad mitigation credits, which could reduce a policyholder's premiums by more than 50 percent.
Windpool rates in Florida have increased a statewide average 30 percent as part
of a five-year plan to increase overall rates by 96 percent.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, July 20, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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