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State Farm Pullout Might Prompt Legislation

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By Carl  Orth | The Suncoast News

Published: January 29, 2009

At least one West Pasco lawmaker is infuriated with State Farm Florida after the insurance firm announced it wants to pull out of property insurance.

In fact, state Sen. Mike Fasano is so mad he may try to force the company out of other Florida insurance markets.

"They should be ashamed of themselves," Fasano, R-New Port Richey, said Wednesday, referring to State Farm executives.

The company announced Tuesday it wants to withdraw gradually from riskier property insurance after state regulators denied its 47 percent rate hike overall. The company underwrites about 1.2 million residential insurance and other related property insurance policies from its Winter Haven headquarters.

"We tried everything possible to avoid this decision," a State Farm Florida spokeswoman, Michal Connolly, said during a telephone interview.

"Simply put," Connolly said, the company has been paying out $1.21 for every $1 collected in premiums. "Anyone can do the simple math."

But Illinois-based State Farm wants to continue to offer auto, life and health insurance, among other products, under the umbrella of the State Farm Mutual Automobile Insurance Co.

Legislation to prevent such insurance market "cherry picking" is gaining momentum, Fasano believes.

A company would have to offer all the types of insurance it markets if it wants to do business at all in Florida.

Fasano has re-introduced the bill to that effect for the 2009 session of the Florida Legislature, which starts March 3.

Fasano also backs limits on State Farm or any insurer to forbid them from cancelling more than 2 percent of existing homeowner insurance policies in any given year.

Citizens Property Insurance Corp., the state's insurer of last resort, could not handle an influx of more than 703,000 former State Farm homeowner insurance policyholders, according to Fasano.

"They can cry and whine, but the bottom line is nationally they are making billions of dollars in profits," Fasano said of State Farm.

Following Hurricane Andrew, in 1992, Florida allowed national insurance corporations to spin off their Florida operations into separate subsidiaries. The companies said they needed the subsidiaries to limit the risk associated with underwriting property in the face of possible catastrophic hurricane damage.

"I don't think anybody can predict what will happen" on legislation, Connolly said when asked about the proposed law Fasano is threatening to introduce.

In Pasco, though, about the only option remaining is Citizens Property, according to one independent insurance agent, Shelita Stuart of Walden Insurance Network in Port Richey.

Even HomeWise Insurance, one of the few companies that had been writing property policies in Pasco, is pulling out, Walden noted. Tampa-based HomeWise informed her it had stopped writing new policies and probably will cancel existing policies over time, she said.

"We don't have a lot of options here," Walden said.

Carl Orth can be reached at 727-815-1068 or corth@suncoastnews.com.

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