State Farm Florida Q&As

State Farm’s decision to no longer insure property in Florida shuffles the insurance deck and raises many questions. A few won’t be answered until the court system has time to analyze differences of opinion. Others will face scrutiny by the Florida Legislature when it meets for its regular session March 3. With those caveats, here’s the latest information:

Q. I’m a State Farm Florida property insurance customer. What do I do now?

Florida has, by law, 90 days to respond to State Farm’s request to pull out. If the state approves the State Farm pullout, State Farm must still offer policies for 180 days. Assuming the state takes the full 90 days, current policyholders will still be covered by State Farm until October.

However, it doesn’t hurt to start shopping for a new policy now. More than a dozen new property insurance companies have entered the Florida market in the past few years, and property owners have options. Specific options will depend on where you live. Some homeowners will probably opt for Citizens Property Insurance, the state-run insurer of last resort; for a few owners, Citizens might be their only choice.

In addition, each insurer has its own rules. Some may not insure a house with a roof over 15 years old; others might not insure a house at all if it’s over 75 years old. With so many variables, many property owners have already started looking for a State Farm replacement.

You can check an insurer’s financial rating through companies such as the TheStreet.com or Fitch Ratings, or ask your agent to provide the rating. If you have problems, help is available through the Florida Market Assistance Plan at www.fmap.org or by calling 800.524.9023.

Q. Are smaller insurers as good as State Farm?

A. Florida has standards that must be met before approving new insurance companies. None of the newer ones, however, have been tested post-hurricane thanks to the state’s recent quiet hurricane seasons. However, the state has a backup program to help homeowners should an insurer fail, giving property owners some peace of mind if opting for one of these smaller companies.

Q. What type of insurance is affected?

A. State Farm Florida plans to drop the following types of policies statewide: homeowners, renters, condominium unit owners, personal liability, boats, personal watercraft, personal articles, and business property and liability policies. State Farm Mutual Automobile Insurance Company (State Farm Mutual) and its affiliated companies want to continue providing the following: automobile insurance, life insurance, health insurance and other financial products and services.

Q. Will State Farm contact me?

A. State Farm Florida must give current customers ample warning if their policy is being cancelled. If you have questions, the company suggests you call your agent to, toll free, to 800-381-3963. The Web site is: www.statefarm.com/florida.

Q. When will I lose my coverage?

A. The entire process could take about two years, though State Farm has said it will drop its riskiest property insurance policies and all of its boat policies on their anniversary renewal dates during the first year.

Q. Why is this happening?

A. According to State Farm Florida, it would be insolvent by 2011 under the current system since state regulators will not approve rate hikes. The company was recently turned down for a rate hike that averaged 47 percent. According to State Farm Florida, it pays out $1.21 in claims for every dollar it takes in.

Q. How can State Farm still insure autos?

A. In 2007, the Florida Legislature passed a law that requires an insurance company to sell homeowners policies in Florida providing it writes homeowners policies in other states and also writes auto insurance policies in Florida. However, State Farm plans to move all its auto insurance policies into State Farm Mutual Automobile Insurance Company, which does not offer property insurance in any other state.

Q. What is FAR doing about this?

A. Property insurance and its costs continue to be a top legislative issue for the Florida Association of Realtors, with leaders and staff working to keep it affordable and available. A number of initiatives have been suggested so far, such as a new law to limit the amount of policies a single insurer can cancel in any given year. In addition, laws that have allowed State Farm to offer multi-peril coverage that include the state’s insurer of last resort will be re-examined. As the strongest lobbyist in Florida, FAR will be at the table as the Florida Legislature examines its options.

Q. Where do I go with more questions?

A. The Florida Department of Financial Services offers a consumer helpline for those seeking more help. Visit http://www.fldfs.com or call the Consumer Helpline at 877-MY-FL-CFO.

© 2009 FLORIDA ASSOCIATION OF REALTORS®