Posted by Tom Carolan on Mon, Jan 11, 2010 @ 02:49 PM
Although State Farm Mutual
Automobile Insurance Company had made a January 2009 decision to stop providing residential coverage to Florida home owners, they have reversed the decision due to receiving approval from the Florida Insurance Commissioner to raise rates and drop customers.
According to Insurance Commissioner Kevin McCarty, State Farm will once again sell residential insurance in Florida but with a significant increase in prices and with plans to drop an estimated 125,000 homeowners from its current roster of over 800,000 residential customers.
One of the largest home insurers in the U.S., State Farm decided in early 2009 to cease coverage for Florida homes over a two year process because they received a denial on their request to raise rates. However, McCarty and other regulators are now working with State Farm in an effort to limit the numbers of homeowners relying on Citizens Property Insurance Corp., which is a state-run company. The reasoning stems from the fact that national private carriers are decreasing home insurance coverage in an effort to cushion from the major losses they experienced during the 2004-2005 hurricane seasons.
Chris Neal with Florida's State Farm sector explained that the agreement with State Farm provides help in a time of financial difficulty for the company, reducing the risk exposure and addressing rate inadequacies.
Reportedly State Farm customers were vocal about wanting to receive home insurance coverage through the company, even if it meant higher premiums. State Farm's national standing and reputation as a solid company made it a preferred choice to the private state option found through Citizen's Property. Insurance Information Institute President Robert Hartwig explains that confidence in the state option wasn't high, because it has repeatedly suffered from financial problems.
With permission to drop customers, State Farm can do so without restrictions. Neal said the company based in Illinois can drop any customers without reason, and that homes near the coast and more vulnerable to damages from storms are likely to lose out on coverage through the Insurer. Other factors that State Farm will consider as they determine coverage and renewal status include age of the building being insured and potential rebuild costs.
State Farm does, however, have guidelines stating they must give policyholders a notice of six months before dropping so that they mind find another insurance provider. The company recently released a statement explaining that current policyholders will begin to receive notices in February if they are being dropped. Agents with State Farm have the opportunity to work with agents from other insurance companies to replace policies losing coverage.
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