State Farm Florida, a Florida homeowners insurance company who is a subsidiary of State Farm Mutual Insurance Company, plans to cease operations in Florida this year according to an announcement made in January of 2009. The announcement comes after a recent rejection by the state insurance department for a rate hike requested by the insurer. This Florida home insurance rate increase request was the result of significant losses sustained by the insurer during the 2004 hurricane season.
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State Farm Mutual Insurance Company is the largest personal lines insurance company in the U.S. and is ranked 32nd of the Fortune 500 companies. State Farm boasted over 61 billion in annual revenue in 2008 and 172 billion in assets. They used to offer Florida homeowners insurance, home, and house insurance products in the state. If you need a new homeowners insurance quote in Florida, click here today.
Florida Insurance Commissioner Kevin McCarty is currently negotiating with the insurance giant but the company remains resolute in their assertion that they will leave the state by the end of the year.
Chris Neal is a spokesman for State Farm who has indicated that current talks are merely to negotiate the terms by which the company will leave the state.
Government officials are hopeful that State Farm Florida will retain at least some of its presence within the state. However, officials do acknowledge that there are many other property and casualty insurers operating in Florida that can serve customers who may lose Florida homeowners insurance coverage if State Farm Florida does eventually cease business operations within the Florida. Policies that cannot be placed with other insurers would be placed in the state-run risk pool. If a significant number of policies cannot be placed with private insurers, this pool may be placed at risk of being overburdened.
State Insurance Commissioner Kevin McCarty has expressed optimism that private insurers within the state are well positioned to accept and service the business left behind by the giant insurer. State Farm Florida currently maintains about 1.2 million policies within Florida. The state’s goal in working with State Farm Florida is to limit the departure to a staged affair whereby policies can be terminated over time so that the market within Florida is not shocked by the sudden change with their house insurance.
State Farm Florida had originally expressed intentions of an immediate pullout, which would cause many policyholders to seek coverage from state run Citizens Insurance Company. This sudden influx of new business could put Citizens at risk. Citizens Insurance is currently subsidized by the state, and is one of the state’s largest property casualty insurance companies.
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State Farm Florida’s announcement that they would be leaving the state is largely the result of losses associated with hurricane losses from 2004 which cost them billions, and which forced the insurer to borrow $750 million to pay back loans to cover their commitments.
The company had most recently requested a rate increase of 47.1 percent, which had been rejected by state officials. Two years before this recent request, regulators had approved a rate hike of 52.8 percent but this time they struck down the request. The company’s announcement in January 2009 came just two weeks after the state rejected their rate increase request.
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