I'm a State Farm Florida property insurance customer. What do I do now?
It pays to start shopping around for a new policy. The good news is that more than a dozen insurance companies have entered the market since the hurricane induced meltdown of 2004-06.
Citizens Property Insurance Corp., the state's insurer of last resort, has been farming out hundreds of thousands of its policies to startup companies. Firms in that group include American Integrity Insurance, United Property & Casualty and Federated National Insurance. Many have been dubbed poor financial risks, though none has been tested thanks to our mostly storm-free hurricane seasons since 2006.
Companies with stronger ratings have been branching out in Florida, too. One is St. Petersburg's ASI, which recently insured only newer homes, but now is taking on older homes.
You'll generally pay more if your house is showing its age or located in an area considered a high sinkhole risk. Some companies, including American Integrity, won't insure a house more than 75 years old. Most won't cover a structure with a roof older than 15 years.
On the plus side, home replacement costs are generally lower than they were during the housing boom. That's helped constrain premiums.
It can't hurt to check an insurer's financial rating available from such companies as the TheStreet.com or Fitch Ratings. You can ask your agent to provide the rating. Why place your home with a "D" company when an "A" is available?
If you struggle to find coverage, contact the Florida Market Assistance Plan at www.fmap.org or by calling toll-free 1-800-524-9023. FMAP helps consumers find coverage. If you still can't secure a policy, an agent will place you with Citizens Property Insurance.
How do I know if I'm affected?
State Farm Florida is required to give you warning that your policy won't be renewed. The pullout affects about 1.2 million policies for home and condo owners, renters and customers with coverage for personal liability, boats, personal articles and business property and liability. State Farm asks customers with questions to call their agents or toll-free 1-800-381-3963. They can also visit www.statefarm.com/florida for updates on the withdrawal process.
When will I lose my coverage?
No one will be affected immediately. First the state has 90 days to review and approve the pullout plan. Then, State Farm has to provide 180 days notice to customers before it drops any policies. Based on a withdrawal plan drafted by State Farm, it will be a two-year process. In the first year, about 470,000 property insurance policies, representing the riskiest part of State Farm's portfolio, will be dropped. Each of those policies will be dropped on its anniversary date within that first year. All boat-owner policies are being dropped during the first year. The last State Farm Florida policy would lapse by the end of 2011, at which point the company would surrender its license to write property insurance in Florida.
Why is State Farm Florida pulling out of the property insurance business now?
State Farm Florida says its net worth has dropped nearly 25 percent since 2006 because of rising costs and state mandates. The company said it has paid out $1.21 in claims for every dollar of premiums it has collected since 2000. Even without a hurricane hitting Florida, it projects it would be insolvent by 2011. After the state rejected its bid to hike rates an average of 47 percent, that was the last straw, State Farm said.
Why is State Farm Florida still allowed to write auto polices? If it is dropping property insurance, I thought that was against the law.
Gov. Charlie Crist campaigned to crack down on companies that "cherry-pick" or sell homeowners insurance in other states but only sell more profitable lines of coverage in Florida. However, the Legislature's effort to crack down on the practice was watered down and applies to few, if any, companies. In State Farm's case, it's transferring all its auto policies to the parent company, State Farm Mutual Automobile Insurance Company, which doesn't sell homeowners insurance in any state, both State Farm and the Office of Insurance Regulation confirmed.
Staff writers Jeff Harrington, James Thorner and Jennifer Liberto contributed to this report, which includes information from State Farm Florida and Citizens Property Insurance Corp.