Angry Customers Shop For Insurance

Like a good neighbor, is State Farm still there?

Not for Ed Cunningham and 8,173 other Highlands County clients.

"I'm dropping everything," said Cunningham, 66, an indignant U.S. Navy veteran from Lake Placid. He's finding a new insurance company to write his homeowner's, automobile and liability insurance policies.

Well, he reasoned, State Farm canceled him first.

On Tuesday, State Farm Florida Insurance Company filed plans to discontinue its property insurance sales. And just as lawmakers and clients started to think the nation's largest insurance company was just bluffing, letters went out to consumers.

"I got mine yesterday," said Cunningham. "It says, 'Thank you for your blah blah blah,' It means, 'You're out of here, pal.'"

State Farm, Cunningham's insurance company for 38 years, won't be renewing its policy on his 1,000 square-foot concrete block house. He moved to Lake Placid in 2006 and completely remodeled the lake home. On Tuesday, he's installing tens of thousands of dollars worth of solar panels.

State Farm is discontinuing insurance for homeowners, renters, rental condominium unit-owners, contractors, condominium unit-owners, rental dwellings, manufactured homes, businesses, churches, boats, personal articles, apartments, commercial inland marine, commercial liability and personal liability.

So, Cunningham promptly called his Lake Placid agent, to let her know he won't renewing his automobile insurance.

"She said, 'Wait a minute. It sounds like you're panicking.' I'm not panicking. I'm dropping everything. They're gone. And I'm not waiting for the end of the year," Cunningham said Friday.

Instead, he's shopping for insurance. So are 800,000 State Farm policyholders, who will be without home insurance coverage.

No Choice?

President Jim Thompson said State Farm Florida can no longer cover claims and expenses. The company will leave its policyholders time to find other insurers.

State Farm Mutual Automobile Insurance Co. wants to continue to offer auto, life and health insurance, among other products.

That may not be possible. A 2007 state law prevents insurers from offering only auto insurance in Florida if they offer both homeowner and auto insurance in other states.

That's insurance market "cherry picking," State Sen. Mike Fasano, R-New Port Richey, told the Sun Coast News. Legislation to prevent State Farm from doing it is gaining momentum, Fasano believes.

A company must offer every type of insurance it markets if it wants to do business in Florida. Fasano has re-introduced a bill to that effect for the 2009 session of the Florida Legislature, which starts March 3.

Fasano also would forbid State Farm and other insurers from cancelling more than 2 percent of homeowner insurance policies in a year.

Sound And Fury

The House Insurance, Business and Financial Affairs Policy Committee, chaired by Rep. Pat Patterson, R-DeLand, has "invited" State Farm representatives to a meeting next week. And just in case they forget to RSVP, the insurance commissioner issued a subpoena, the News Service of Florida reported.

"We tried everything possible to avoid this decision," a State Farm Florida spokeswoman, Michal Connolly, told the Sun Coast News.

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

Surplus funds held by State Farm's Florida unit fell by $201 million, or 24 percent, in the first three quarters of 2008, a period when no hurricanes hit the state, said State Farm spokesman Jeff McCollum.

Even so, lawmakers are enraged.

State Farm executives "should be ashamed of themselves," Fasano said. "They can cry and whine, but the bottom line is, nationally, they are making billions of dollars."

What's Next

According to Bloomberg, State Farm lent $750 million to its Florida subsidiary after a series of storms in 2004 that the subsidiary was never able to repay.

Where will property owners go now?

The two largest U.S. residential insurers are State Farm and Allstate, both of which scaled back following record storm seasons in 2004 and 2005.

Allstate, based in Northbrook, Ill., last year reversed its four-year-old policy of not accepting new Florida homeowners, saying it would take on new policyholders as part of a settlement with State Insurance Commissioner Kevin McCarty.

Florida's largest insurer is now a state-run company, Citizens Property Insurance Corp., that would have to borrow money to meet obligations if a major hurricane were to hit, Fitch Ratings said in a report last year.

Citizens, the state's insurer of last resort, could not handle hundreds of thousands of former State Farm homeowner insurance policyholders, according to Fasano.

State Farm Is Where?

McCarty has 90 days to review State Farm's plan to ensure it complies with state law. If approved, the insurer must then provide 180 days notice before any policyholders can be "non-renewed," or denied a new policy when coverage expires, the commissioner said in a statement to Bloomberg.

"We will carefully review State Farm's intended plans to ensure that they are in compliance with Florida law, and we will explore all legal options as well," McCarty said.

The commissioner's office will review whether State Farm is complying with a law governing car insurers that don't sell coverage of homes in the state and another that requires companies to make adequate provisions before dropping policyholders, said Ed Domansky, a spokesman for the insurance commissioner.

To find coverage, consumers can contact the Florida Market Assistance Plan at www.fmap.org or call 800-524-9023.