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Hernando Today

State Farm Decision Is Controversial

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By TONY HOLT

Hernando Today

Published: January 30, 2009

SPRING HILL - Local State Farm customers are fuming over the recent news the insurance company would eliminate its homeowner coverage in Florida.

One local legislator said he hears from them constantly.

"State Farm has netted billions," said Sen. Mike Fasano, R-New Port Richey. "When they cry poor mouth, they're not telling the whole story."

He thinks the insurance provider is earning its profits in its other divisions, as well as in other states. Their claims of financial woes in the Florida market are greatly exaggerated, he said.

Fasano is hoping to fend off State Farm's plans to scale back its local coverage with the passage of some key bills.

The first is an "anti-cherry picking bill" that would mandate any insurance company offering homeowners insurance in other states to offer it in Florida, or else it can't offer other forms of insurance, like auto or life.

Another bill would implement a 2-percent cap on what insurance companies can drop each calendar year.

Similar bills have been introduced in the past and have failed, but in light of State Farm's announcement it would discontinue its homeowner coverage in two years Fasano thinks they will garner enough "yes" votes this year.

"Insurance companies today have ignored their responsibilities," he said. "Shame on State Farm for turning their backs on their long-time customers."

Roughly 222 other insurance companies in the state offer homeowners insurance, said Scott Johnson, of the Florida Association of Insurance Agents in Tallahassee.

"For most property owners, there are several options available," Johnson said. "They should flip through the Yellow Pages and look for independent insurance agents. Those agents already are getting an influx of calls from State Farm customers."

Chris Neal, a spokesman for State Farm of Florida, said the company had to make the move or else it would be unable to cover the damage from the next hurricane. Whenever an insurance company doesn't have enough "up front" money to pay the damage, the Office of Insurance Regulation steps in and shuts it down.

"Our situation is purely a financial one," he said. "We took this step today to meet our financial obligations in the future. It was our last choice. It's obviously not something we wanted to do."

After State Farm made its decision to discontinue homeowner coverage in Florida, it must go through a 90-day regulatory review from an insurance commissioner. After that, the company must give 180 days notice to customers.

By the time the last policy runs out, the process will have taken more than two years, Neal said.

Local State Farm agent James Yant said any time a major insurance company folds its tent, residents will suffer. Fewer choices will lead to more expense.

"It's no good at all to have less competition," he said.

Yant said he turns 63 next month. He is close to retirement, so he won't feel the sting compared to his State Farm colleagues.

Other agents contacted over the phone declined to comment.

Fasano said he has heard from residents who, like him, reject any claims that State Farm is losing money. It might not be making a profit for homeowner coverage in Florida, but it is likely making money in other divisions and other states, he said.

"This is just a ploy," he said. "They're trying to fool the public and they're not fooling the public."

Reporter Tony Holt can be reached at 352-544-5283 or wholt@hernandotoday.com.

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