State Farm has notified officials in Florida that it plans to stop selling property insurance in the state. The move may leave 1.2 million State Farm customers in the hurricane-prone state looking for an insurance company.
Tuesday's announcement that State Farm was pulling out of Florida's residential market followed a meeting involving the company's top officials and regulators in Tallahassee.
State Farm president Jim Thompson, said in a statement, "This is not an action we wanted to take, but one we must make given the realities of the Florida property insurance market."
The company says during 2008, it saw its surpluses in Florida reduced by $201 million. And that was in a year when no major hurricanes hit the Sunshine State.
To help rebuild the surplus, State Farm asked Florida regulators for a 47 percent rate increase. That request was denied.
Floridians have seen disputes between insurance companies and state regulators before. A year ago, Allstate and Florida officials were locked in a similar fight. Eventually, Allstate settled its dispute with the state and agreed to write 100,000 new homeowners policies over a three year period.
Ed Domansky of the Office of Insurance Regulation says if State Farm pulls out, consumers will still have lots of options. In the last two years, he says 30 new insurance companies have been licensed to write homeowner policies in Florida. Domansky says, "Those companies right now are eager to take on new customers and show Floridians what they can do."
The state now has 90 days to review State Farm's request to pull out of the market. After that, the company is required to give customers at least six months notice if their policies won't be renewed.
State Farm says its decision will only affect property insurance policies — not its nearly three million auto insurance customers or those with life and health insurance coverage.
When asked about State Farm's announcement, Florida's governor Charlie Crist was anything but conciliatory. "They probably charge about the highest rates in the state anyway," he said. "I think Floridians will be much better off without them."