State Farm to Florida homeowners: No thanks

The insurer won't issue new homeowner policies in this state.

By Tom Zucco, Times Staff Writer
Published February 23, 2008

State Farm, the largest private insurance company in Florida, will stop writing new homeowner policies anywhere in the state, a company spokesman confirmed Friday.

State Farm has a significant presence in the Tampa Bay area with about 120,000 policyholders, or nearly one out of every five homeowners. The company's latest move won't directly affect those policyholders.

But any new customers will be turned away.

As other major private insurers in Florida have dramatically slashed their policy count, State Farm has remained fairly steady with about 1-million policies. Its moratorium on all new homeowners insurance business could steadily whittle away its presence here, putting greater financial risk from a major hurricane more squarely on Florida residents through state-run Citizens Property Insurance and the state's hurricane catastrophe fund.

State Farm spokesman Chris Neal said the company was forced to take this step because of "the current environment" in Florida, specifically legislation passed last year designed to force property insurance companies to lower their premiums. "We've got to have the reserves to pay claims of our existing customers."

State Farm paid out more than $4.4-billion in claims for the eight hurricanes that struck Florida in 2004-05.

The company, a subsidiary of Bloomington, Ill.-based State Farm Mutual, says its exposure to risk far outweighs its ability to build reserves needed to pay for future storms.

Dropping policies

Its ban on new policies, as first reported Friday by tampabay.com, comes as the company embarks on a yearlong process of dropping 50,000 policies along Florida's coast. It also comes after an unusual meeting Thursday of State Farm officials and the company's nearly 900 Florida agents, many of whom expressed concern that their ability to write new policies has been handcuffed by recent changes in state law.

Last February, State Farm stopped writing new homeowner policies in Mississippi.

In a brief statement to the St. Petersburg Times, State Farm officials explained that "to responsively manage our growth and maintain financial stability, we are implementing an overall statewide plan to limit our growth in Florida."

The only exception to the new rule, Neal said, are some homeowners who already have a State Farm policy and move within the state. But that number could be small. Neal said that in all of 2007, about 20,000 State Farm policyholders were allowed to keep their policies after they moved.

"I don't know all the specifics," Neal said. "But only a few people will be able to buy new State Farm insurance. We're already not writing new business in Pinellas."

In addition to 1-million homes, State Farm insures about 2.8-million autos in Florida. But the homeowner count will undoubtedly change as current customers leave the company for various reasons and are not replaced.

Just how many customers State Farm will lose is unclear. The company wrote about 28,000 new homeowner policies during the first six months of 2007. But during the same period, it lost more than 40,000 others to cancellations or nonrenewals.

Regulators approved a 52 percent rate increase for State Farm in 2006, but the legislative changes enacted the following year forced the company to lower its premiums an average of 9 percent statewide.

State Sen. Bill Posey, R-Rockledge, said he was surprised to hear that State Farm was getting out of the homeowner's business, since the company had just made a move to lessen its risk by dropping coastal policies.

"My first question is: Are they also going to stop writing auto insurance policies?" said Posey, who chairs a Senate committee charged with creating insurance policy. Auto insurance is more lucrative for insurance companies than homeowners insurance.

No one immune

State Farm is following in the footsteps of property insurers such as Allstate, Liberty Mutual and Nationwide, which have been gradually retreating from Florida.

Allstate has dropped more than 400,000 homeowner polices statewide over the last four years.

But State Farm had tried to hang on, Neal said, and had planned to focus on inland policies, basically reconfiguring its books to shed riskier properties.

As proof that no one is immune, Neal said that at one of Thursday's meetings with State Farm agents, Joe Formusa, president of State Farm Florida and a Tampa resident, held up a cancellation letter.

It was his own.

Times staff writer Jennifer Liberto contributed to this report. Tom Zucco can be reached at zucco@sptimes.com or (727) 893-8247.


Top 5 property insurers in Florida

  1. Citizens Property*: 1.25-million
  2. State Farm Florida: 1-million
  3. Universal Property: 364,000
  4. Allstate Floridian: 300,000
  5. Nationwide: 205,000

* Run by the state

Source: Florida Office of Insurance Regulation