In 2009, State Farm Florida Insurance Company had ended its property insurance business in on the back of what it called an ‘insolvency threat’ (Florida is a high-risk state for property insurers because of its susceptibility to hurricanes).
The company stated that its Floridian property insurance business had become unviable and that the returns did not justify its continuing presence in Florida. The company also said that there was a serious danger that if it continued, the company would become insolvent by 2011 and then it would not be able to honor its pledges to customers. The company later surrendered thousands of property insurance policies.
State Farm to reenter the Florida homeowners insurance market
Now State Farm Insurance is coming back to Florida – But there’s a catch. The corporate entity is not coming back, only a company subsidiary. This may not be so good for potential policy holders. One possible outcome could be that if the subsidiary ever runs into rough weather or lawsuit, the corporate entity would not have to pay for the damages. The subsidiary only gets the company namesake, and little of anything else.
The full specifics of the plan are not clear, as State Farm says that it is bound by antitrust laws so it cannot discuss its future plans for the state. It seems the company has realized that withdrawing from Florida was not such a good idea after all. Florida has not been hit by any major hurricane in more than five years. The Office of Insurance Regulation has also said that the Floridian property insurance market could be profitable. For example, Floridian property insurance companies collected in excess of $7.7 billion from Floridian citizens, in premiums in 2012 but paid only $2.5 billion in compensation.
State Farm won’t have it easy this time
At one time, the company was the Florida’s largest property insurer. But after it pulled out, many other companies have gained a foothold in the market. State Farm will have to eat into their market share to create space for itself. The company also at one time had more than 800 insurance agents in the state. Many of the company’s former customers, including homeowners here in Palmetto, FL have moved to the state-owned Citizens Property Insurance, or other reputable homeowners insurance companies. Coaxing these former customers back to State Farm will be a herculean task, by all indications.
