Posted on 17 Dec 2009
State Farm Florida has canceled its plans to leave the property insurance market in Florida, according to Florida's Office of Insurance Regulation.
The Florida regulator said Wednesday that it has reached an agreement with the Florida unit of State Farm Mutual Automobile Insurance Co. to allow it to not renew up to 125,000 of its 810,415 residential property policies in the state, and to raise its insurance rates 14.8% on all home owners and condominium unit owners policies.
"This is an important step. It helps stem State Farm Florida's deteriorating financial condition. It reduces the company's risk exposure. It moves us closer to rate adequacy. And for most of our customers it means that State Farm Florida continues to be there for them," said Jim Thompson, president of State Farm Florida in a press release. He said that State Farm was losing $20 million a month in the state.
The settlement comes after Florida denied State Farm's request to raise its insurance rates by 67.1% on average. For policies that State Farm will not renew, the insurer will give policyholders at least six months advance notice, in order to give homeowners a chance to find new coverage.
State Farm, the nation's largest personal lines insurer, and the second largest in Florida in terms of homeowners policies, responded in January with the announcement that it would withdraw from the state. State Farm has said it needed the rate increase to remain viable in Florida, which was hit by several major hurricanes in 2004 and 2005.
Since then, insurers have asked for big rate increases or reduced their business in the state, leaving the state-run insurer, Citizens Property Insurance Corp., to take on more exposure in the state. As of November, Citizens had 1.1 million policies. State Farm will remain the second-largest insurer in the state even after it reduces its policies.
The agreement between Florida's insurance office and State Farm ends litigation between the two over State Farm's plan to leave the state.