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Insurers not taking in Tampa Bay's State Farm policyholders

Nothing comes easy for the Florida homeowners State Farm plans to dump, particularly those who live in the Tampa Bay area.

Although state regulators are hopeful that smaller Florida-based insurers will pick up the bulk of the 1.2 million State Farm property insurance policies, the bay area's proximity to water and legacy of costly sinkhole damage continues to scare away insurers.

Case in point: Security First Insurance.

On Monday, Ormond Beach's Security First tried to capitalize on State Farm's massive pullout, pledging to pick up 50,000 customers "in every county and in every ZIP code in the state on a first-come, first-served basis."

Turns out that promise wasn't quite accurate.

The offer has a large caveat, as State Farm customers from the bay area flooding Security First's Web site (www.securityfirstflorida.com) and toll-free number (1-877-333-9992) found out. For now, Security First isn't writing homeowners coverage in all or part of six counties statewide: Pinellas, Pasco, Hernando, Hillsborough, Citrus and Marion.

The sticking point, according to the company, is not the threat of hurricanes, but sinkhole risks. Security First's president, former state Sen. Locke Burt, is seeking regulatory approval to write a homeowners policy in those counties under the condition the property owner agrees to front half the cost of an internal structural inspection for evidence of sinkholes or sinkhole damage.

Burt, who estimated the total inspection cost at less than $150, said he met with Florida Insurance Commissioner Kevin McCarty on Tuesday to pitch his idea.

His advice to State Farm policyholders in frozen-out counties: If you have a condo policy, Security First will take your business; if you have homeowners, give your information, and the company will get back to you.

Another young Florida insurer, St. Petersburg's Edison Insurance Group, is likewise eager to snap up State Farm customers. But it too has caveats. President and chief executive David Howard said Pinellas has stricter underwriting guidelines, the company won't write for properties within a half-mile of tidal waters, and it's limited to assuming fewer than 20,000 policies statewide.

State Farm last week told regulators it wants to phase out of the property market over two years. Its exodus has triggered concerns that many of its policies will flood into Citizens Property Insurance, the state-run insurer of last resort. That would increase risk to all Floridians, who have to cover the tab if Citizens can't pay its damage claims after a hurricane.

In addition to State Farm, several other large insurers based outside of Florida have cut back dramatically and/or stopped writing policies here. That leaves Florida-based startups as the best hope for absorbing policies that would otherwise wind up with Citizens.

Security First's offer Monday triggered a deluge from State Farm customers motivated by either fear or anger. Its Web traffic jumped 600 percent and phone traffic rose 250 percent.

Several residents from Pinellas, Pasco and Hernando counties told the Times that they were either told by an agent or saw a notice on the company's Web site that they wouldn't be covered by Security First. Burt's message about holding on for a future ruling was never relayed to them, they said.

George Dwyer of Spring Hill, a State Farm customer for 40-plus years, was told his home wouldn't be covered because it's in Hernando County. He's examining other small insurers, though he wonders how stable they are.

"It's just so frustrating because you don't know any of these companies," said Dwyer, a retired school administrator who moved to Florida in 1992. "It's like these names are being pulled out of a hat."

Insurers not taking in Tampa Bay's State Farm policyholders 02/04/09 [Last modified: Thursday, February 5, 2009 7:31am]

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