Thursday, July 13, 2023

Major Insurance Company Pulls Out of Florida

Storm clouds seen over Miami as Hurricane Isaias approaches the east coast of Florida on Aug. 1, 2020. (Joe Raedle/Getty Images)

Storm clouds seen over Miami as Hurricane Isaias approaches the east coast of Florida on Aug. 1, 2020. (Joe Raedle/Getty Images) 

Farmers Insurance said it will stop offering its policies in Florida, including for home and car insurance, in a change that will force tens of thousands of people to switch to a different insurance company.

In a statement, Farmers Insurance said it made the decision to manage its exposure to risk in Florida, a state that sees hurricanes and tropical storms nearly every year.

A Farmers Insurance spokesperson said on July 12, “Affected customers will receive notifications detailing when their coverage will end and will be advised of options for replacement coverage.”

The company added that it was a “business decision” that is “necessary to effectively manage risk exposure,” adding that “Farmers offers insurance through several different brands, and this decision applies only to policies issued through our exclusive agency distribution channel.”

“There is no impact to 70 percent of policies currently in force for customers in the state, including Bristol West, Foremost SignatureSM, Farmers GroupSelectSM, Foremost Choice, and Foremost-branded policies,” the statement reads. “Such policies will continue to be available to serve the insurance needs of Floridians. Affected customers will receive notifications detailing when their coverage will end and will be advised of options for replacement coverage.”

In response, Florida Chief Financial Officer Jimmy Patronis said the state will hold Farmers Insurance accountable should any mishaps arise.

“I’ve always said that when big decisions are made on insurance—the policyholder is rarely in the room—and unfortunately Farmers Insurance proved me right,” Mr. Patronis said. “I have asked my team to put their heads together in holding Farmers Insurance accountable to Florida policyholders. I want additional scrutiny on this company.

“It’s clear that while Farmers was making plans to exit a significant number of policies out of Florida, they were playing politics and weren’t focused on running a successful company.”

Mark Friedlander, a spokesperson for Insurance Information Institute, told CNN that over the past year and a half, about 15 home insurers operating in Florida have stopped writing new business, and four have said they would voluntarily withdraw from the state. Another seven were declared insolvent, he added.

“Currently, there are 18 Florida residential insurers on the state regulator’s watch list due to concerns over their financial health,” Mr. Friedlander said.

Florida is often hit by hurricanes and tropical storms. Last year, Hurricane Ian, a Category 5 storm, hit Florida’s western coast and did tens of billions of dollars in damage. Another Category 5 storm, Hurricane Michael, slammed the Florida Panhandle in 2018, also causing billions of dollars worth of destruction.

California Problems

Earlier in the week, Farmers Insurance limited new homeowners insurance policies in California, citing wildfire risks and high costs. Similar moves have been made by State Farm and Allstate in the Golden State in recent months.

“With record-breaking inflation, severe weather events, and reconstruction costs continuing to climb, we are focused on serving our customers while effectively managing our business,” the insurance company said. “Effective July 3, Farmers will limit new homeowners insurance policies in California to a level consistent with the volume we projected to write each month before recent market changes.”

The Insurance Information Institute, an industry group, said that a large number of homes in California are at risk of wildfire.

“The number of acres burned in California has grown steadily in recent years, as more people are moving into fire-prone areas of the state,” the Insurance Information Institute said in a statement last month. “More homes in harm’s way—combined with rising costs of repairing or replacing houses either damaged or lost to fire—leads to increased insured losses. On top of all of this are the underwriting challenges associated with public policy in the state.”

Epoch Times Photo
The Bond Fire in Silverado Canyon, Calif., on Dec. 3, 2020. (John Fredricks/The Epoch Times)

That group stated that more than 1.2 million California homes are at risk of damage or destruction due to wildfire, far more than in any other state in the country.

In a statement several weeks ago, State Farm also cited management of risk exposure as the reason for leaving California.

“It’s necessary to take these actions now to improve the company’s financial strength,”  State Farm stated.

Allstate, meanwhile, announced in November that it would place a moratorium on new homeowner’s condominium and business insurance policies in the state. The move, it said, was designed to protect its customers.

“The cost to insure new home customers in California is far higher than the price they would pay for policies due to wildfires, higher costs for repairing homes, and higher reinsurance premiums,” Allstate stated at the time.

David A. Sampson, American Property Casualty Insurance Association president,  and CEO, told Reinsurance News, “Insurers do not want to retrench from one of the nation’s most important markets, but cannot continue to operate and protect policyholders when insurers are struggling to secure an adequate rate and manage their risk exposure.”

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