State Farm Pulls Out Of Florida Property Market

He said the Office of Insurance Regulation had "been hearing for months of possible plans to make such a move in Florida, including a document submitted to the office as recently as Dec. 5 as part of their recoupment filing that showed an anticipated reduction to 655,000 HO policies by 2010."

State Farm Florida Insurance Company, headquartered in Winter Haven, Fla., said it currently services approximately 1.2 million residential insurance and other related property insurance policies.

"We will carefully review State Farm's intended plans to ensure that they are in compliance with Florida law, and we will explore all legal options as well," Mr. McCarty said.

He promised to do "everything within my power to protect Florida consumers from unnecessary destabilization of the insurance market that this might cause and to ensure that Florida consumers are protected and have access to insurance at rates that are not excessive or unfairly discriminatory."

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 nonrenewals a company can issue in a year.

"To help ease the transition of policies, Florida already has new companies who are eagerly looking to grow their businesses and will welcome the opportunity to add more customers. I encourage everyone to work closely with their agent to choose a new company that will offer needed coverage at a price you can afford.

"It also is important that State Farm customers understand that the office must first approve State Farm's plan. The office has 90 days to do that. If approved, State Farm must then provide 180 days notice to customers before any policies can be nonrenewed," he said.

Jim Thompson, president, State Farm Florida, said in a statement, "This is not an action we wanted to take, but one we must take given the realities of the Florida property insurance market. We regret the impact this will have on our customers, employees and agents in Florida."

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.

He noted that the state-created Citizens Property Insurance Company was also struggling with rate and surplus adequacy.

Scott Wallace, president, CEO and executive director of Citizens, said his company "will work with Mr. McCarty's office and other interested parties to facilitate a smooth transition of as many of these policies as possible to the voluntary market."

"We urge State Farm customers to shop for coverage with local agents who represent other companies. If coverage cannot be found, State Farm customers may contact the Florida Market Assistance Plan (FMAP)."

Reacting to the State Farm announcement, Washington-based Competitive Enterprise Institute, a group that advocates for free enterprise and limited government, blamed Florida's regulatory actions for troubles in the state's property insurance market.

Christian Camara, director of the group's Florida Office, said the company's departure from Florida "is yet another example of how government intrusion in the marketplace discourages private companies from competing with one another. Every time an insurer leaves Florida, risk is concentrated in less companies, which results in higher insurance premiums for all Floridians."

The legislature, he said, should consider efforts to reduce restrictions on the free market, shrink the size of Florida Citizens Property Insurance Corporation, and reduce the scope of the Florida Hurricane Catastrophe Fund. "With the economic hardships facing Floridians today, restoring a healthy, competitive insurance environment in Florida should be a top legislative priority," said Mr. Camara.

Florida Chief Financial Officer Alex Sink called it, "unfortunate and disappointing that State Farm Florida has decided to move out of the neighborhood.

"My concern goes out to the more than one million Floridians who will need to transition to a new insurance company during the next two years. We will assemble a team of trained consumer specialists within my department to assist Floridians who might have questions about finding a new insurance policy. We will also continue to post helpful information on our Web site, and my toll-free consumer helpline is ready to help homeowners."

The National Association of Insurance and Financial Advisors Florida called on State Farm "to proceed with all haste to free agents to enter brokering agreements outside of State Farm and minimize lost business due to this move.

"Unfortunately this was quite predictable; the companies that largely rebuilt this state after the devastating 2004 – 2005 hurricane seasons have largely been reduced to political punching bags," said NAIFA spokesman Bob Lotane.

This article updated 4:50 p.m.