State Farm Insurance, Florida’s largest private home insurer, said it will drop about 50,000 homeowners policies next year in what it considers risky areas along the coast.
Most of the homes and condos that will lose their coverage are within a few miles of the coast, but some are farther inland, said Justin Glover, spokesman for Bloomington, Ill.-based State Farm.
Glover said the move was “a very tough decision for us to make, but it is part of our decision to remain in this market.” State Farm filed paperwork July 19 with the state Office of Insurance Regulation announcing its intention to drop the policies.
Glover emphasized that no policy holders will lose coverage during the current hurricane season, which runs through November. Customers will start to be dropped after Jan. 1, when their policies come up for renewal.
The company also said in the filings that it intends to cancel an unspecified number of wind-only policies. Those are policies the company has in certain parts of the state where homeowners have most types of damage, such as fire or theft, covered by another insurance company and State Farm covers wind damage.
State insurance regulators said they would take a hard look at State Farm’s rates in light of its intention to reduce its exposure.
“If State Farm reduces exposure in Florida through the non-renewal of property insurance policies, the Office of Insurance Regulation will revisit State Farm’s rates to ensure they are not excessive,” Florida Insurance Commissioner Kevin McCarty said.
Despite repeated warnings by insurance officials that some companies still don’t consider Florida’s coastlines a profitable place to carry risk, reaction to State Farm’s decision Thursday was one of disappointment, and in some cases surprise.
“These actions are inconsistent with State Farm’s previous statements outlining their underwriting intentions,” McCarty said in a statement released by his office. “The office is in the process of reviewing these filings to ensure they are consistent with Florida law.”
Florida Chief Financial Officer Alex Sink said it was disappointing that the largest private insurer would have such disregard for long-standing customer relationships.
State Farm has more than 1 million policies in Florida, so the number of homeowners whose policies won’t be renewed is a small percentage of the company’s business. State Farm will still be the state’s largest private home insurer by far after the move.
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