By the numbers
Top five insurers in the property insurance market
1) Universal Property & Casualty Insurance Co., 30,133 policies
2) Citizens Property Insurance Corp., 18,614 policies
3) State Farm Florida Insurance Co., 13,867 policies
4) St. John’s Insurance Co. Inc., 6,608
5) Cypress Property & Casualty Insurance Co., 4,642
- - - - - - - - -
1) Citizens Property Insurance Corp., 46,497 policies
2) State Farm Florida Insurance Co., 31,258 policies
3) Universal Property & Casualty Insurance Co., 31,203 policies
4) St. Johns Insurance Co. Inc., 12,724 policies
5) ASI Assurance Corp., 11,134 policies
Source: Florida Office of Insurance Regulation, as of Dec. 31, 2009
NAPLES — After 45 years with State Farm Insurance, Jack Miller of Golden Gate is one of thousands of homeowners getting the boot.
Notice came in March that his residential policy wouldn’t be renewed. His policy expires in September and he’s out shopping for a replacement.
“Now we, my wife and I, who are retired, are joining 125,000 State Farm insured who received a cancellation letter for our homeowner’s insurance,” Miller said in an e-mail.
With large national carriers, such as State Farm and Allstate, cutting policies to reduce their risks in hurricane-prone Florida, smaller companies have emerged that don’t have the same financial backing to weather the storm if a catastrophe strikes. Some of those newer companies already have failed.
“People are being tossed away from State Farm, only to find there is often times a higher price with the company that they are ultimately insured by and they don’t know them,” said Jeff Grady, president of the Florida Association of Insurance Agents. “It’s really kind of a crazy thing. But it is what our market is.”
Many homeowners are out shopping for insurance now because they’ve received notices of nonrenewal or they’ve been warned of a rate increase.
This time of year is usually slower for Tim Shaw, owner of Tim Shaw Insurance in Fort Myers, who has been in the business since 1974. This summer, business hasn’t slowed at all, he said.
It’s not just homeowners that are calling. Earlier this week, Shaw’s company got a call about a policy for a $3 million commercial building that State Farm isn’t renewing.
“It’s sad. It’s not good for consumers to lose (a) best-rated company like State Farm,” Shaw said.
There are a lot of smaller companies out there writing policies with $5 million or $6 million in assets and are nowhere near as strong as State Farm.
He said when looking for a new policy, a consumer should find out how much of a surplus a company has to pay claims and how many “events,” such as hurricanes, its reinsurance policy will cover in a year. Insurers buy reinsurance to help cover their losses.
“We try to sell value, rather than price,” Shaw said.
Jack Powers, a senior vice president of sales for Gulfshore Insurance in Naples, said his company has seen an influx of calls from angry State Farm customers whose residential policies aren’t being renewed. Many want to cancel their other policies with the carrier, including their auto insurance, because they’re so upset, he said.
“They want nothing to do with State Farm,” Powers said.
Finding alternative insurance can be tough.
“If it’s a coastal property, it’s going to be more limited in terms of what carriers are out there,” Powers said.
More homeowners are ending up with policies from the state-run Citizens Property Insurance Corp., known as the insurance of last resort, which is exposing taxpayers in Florida to more liability if disaster strikes.
“Citizens has got the state’s pocketbook at their disposal,” said Grady of the insurance agents association, adding that the company’s premiums don’t match its exposure and won’t for years. “Let’s say a big storm blows them up – that they have more losses than they have monies to pay – they have a taxing authority. They can assess not only their policy holders, but all of those people outside of Citizens.”
In December, State Farm struck a deal with state regulators that allowed the carrier to raise its rates up to 14.8 percent on home and condominium owners. Up to 125,000 nonrenewals are part of the deal.
By the numbers
In December, State Farm struck a deal with state regulators that allowed the carrier to raise its rates up to 14.8 percent on home and condominium owners. Up to 125,000 nonrenewals are part of the deal. It’s not clear how many policies State Farm is canceling in Lee and Collier counties, but it’s in the thousands.
As part of the compromise reached with Florida’s Office of Insurance Regulation, State Farm agreed not to pull out of the property insurance market in Florida.
State Farm threatened to leave the state after its proposal for a more than a 47 percent rate increase – which it said was needed to remain financially sound – was rejected by Florida Insurance Commissioner Kevin McCarty.
Miller, who lives on 50th Terrace S.W. in Golden Gate, isn’t sure why State Farm chose his policy to drop.
It’s not clear how many policies State Farm is canceling in Lee and Collier counties, but it’s in the thousands. The company is dropping insurance for older homes, ones harder to replace and homes in coastal areas that are more prone to hurricane damage, Grady said.
“They didn’t choose to dump the best policies,” he said.
State Farm has contracted with more than a dozen other carriers to provide alternative coverage to customers it is not renewing.
“We are able to place everybody,” said Brian Glaeser, an agent for State Farm in Naples.
But for some local customers, Citizens is the only alternative because they live in older homes, or in homes west of U.S. 41 near the Gulf of Mexico, where there is much greater risk of hurricane damage, he said.
At the end of last year, State Farm was Collier County’s third-largest insurer in the property market, and Lee County’s second-biggest based on total policies, according to a report by the Florida Office of Insurance Regulation.
In Lee, State Farm had 31,258 policies – more than 11 percent of the property insurance market – as of December. In Collier, the company had 13,867 policies – a more than 9 percent market share.
Citizens was the second-largest insurer in Collier at the end of last year, with 18,614 policies, or 12.37 percent of the property market. In Lee, the state-run insurer was No. 1 with 46,497 policies, nearly 16.7 percent of the market.
“There are very few national and regional carriers left here in Florida,” Grady said. “They’ve all departed.”
Companies have left the market because they can’t charge the premiums they need to cover their costs, reduce their exposure, pay their claims and make a profit, Grady said.
Reinsurance costs are higher for insurers in Florida because it’s a peninsula, surrounded by water, requiring higher premiums than in other states.
Most Florida-based insurers have been losing money “hand over foot,” Grady said.
“There are a lot of carriers out there that are financially not very strong,” he said. “The obvious worry is would they hold up if the state were hit by a hurricane, or multiple hurricanes.”
This year, several companies in the state have failed, even without any major storms. One of them was Magnolia Insurance Co. At the end of last year, the company had 2,892 policies in Lee. It had 1,235 policies in Collier.
Many saw promise in Senate Bill 2044, which backers said would have strengthened the finances of the insurance industry in Florida. But it was vetoed by Gov. Charlie Crist after it passed during the regular legislative session.
“We tried to address the cost factors in the industry, to make the industry more solvent,” said state Sen. Garrett Richter, R-Naples, who sponsored the bill.
The legislation, which had widespread support from the industry, would have required start-up insurance companies to have a bigger surplus to pay claims, upping the minimum from $5 million to $15 million. It would have limited claims to three years after a storm, instead of five, and addressed fraud in a program that gives policyholders discounts for hardening homes against storms.
In his veto letter, Crist said he was worried the legislation would lead to more rate hikes and unfairly penalize Floridians who have made investments to strengthen their homes.
Richter plans to bring it up again next year.
“It probably would have kept the numbers in Citizens at least level, and not rising dramatically as they are now,” said Powers with Gulfshore Insurance. “I think long-term it would have created competition, which would have helped all policy holders to get better pricing down the road.”
“The big concern, of course, is the growth of Citizens,” he added. “If it’s not able to pay its claims, then we will have to. Citizens is us.”