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(TampaBay.com (St. Petersburg Tim)   Like a good neighbor, State Farm is there. Unless you live in Florida   (blogs.tampabay.com) divider line 44
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2162 clicks; posted to Business » on 27 Jan 2009 at 1:47 PM (5 years ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2009-01-27 12:01:34 PM
The insurer said it has been hurt by a state-imposed policy to give hefty discounts to customers who strengthen their homes against hurricanes. It has been losing $20 million to $25 million a month in Florida, despite the lack of a major hurricane recently.

They're doing it wrong.

My mom's insurance company encouraged her to do upgrades. They even called her after our last big storm in the summertime to see how the house was.
 
2009-01-27 12:20:31 PM
Which is why I don't use State Farm, even though I don't live in Florida presently. They're more into commitment-avoidance than customer service.
 
2009-01-27 01:04:35 PM
I wasn't aware there were good neighbors in Florida to begin with.
 
2009-01-27 01:29:13 PM
Hot. No, really, this is awesome, because we have State Farm and we get a discount because we upgraded our windows and because we have State Farm for our auto insurance too. With this gone the discount for multiple types of insurance will be gone too.

It'll be a mess of paperwork, but the upshot of this is State Farm will lose a lot of auto insurance customers because of this.

Including me.
 
2009-01-27 01:34:39 PM
redqueenmeg: Hot. No, really, this is awesome, because we have State Farm and we get a discount because we upgraded our windows and because we have State Farm for our auto insurance too. With this gone the discount for multiple types of insurance will be gone too.

It'll be a mess of paperwork, but the upshot of this is State Farm will lose a lot of auto insurance customers because of this.

Including me.


I have friends in the same situation. Umbrella coverage. It will be interesting to see how this works out.

I just hate like hell to see more people resorting to Citizens.
 
2009-01-27 02:02:29 PM
Good for them. They have no obligation to write policies at a loss.

Crist will drive private insurers out of Florida, then a big hurricane will hit and it will all be on Citizens (i.e., taxpayers).
 
2009-01-27 02:36:55 PM
I switched all my insurance and banking to USAA years ago and am never looking back.
 
2009-01-27 02:37:31 PM
Fark State Farm.

They ran me around in circles for almost a year on what should have been a routine payout.

My agent at one point screamed at me that I was the reason for high premiums, because I wouldn't accept an almost new car being rebuilt with junkyard parts - I demanded OEM because that's what I paid for.

They jerked me around like you wouldn't believe - one day I get a call that they have my check, 2 hours north of Atlanta. So I drive all the way up there wondering why they couldn't mail it but eager for my money. I get there and the twatwaffle has a check that is about 5000 dollars light. he plays dumb. My agent plays dumb. Everyone plays dumb but they tell me I need to sign for the check anyways - but the document they were asking me to sign said that by signing I would release them from all responsibility beyond the check they were trying to give me. When I refused to sign and tried to call my lawyer, the douchebags turned it around on me and threatened to call the police on me for fraud?!?!

My lawyer went after them pro bono after that, he was so disgusted. Got paid in full within a month and dumped them. Never had a problem since.

Consumerist Clark Howard has a rule - never buy auto insurance from a company that advertises. Good advice.
 
2009-01-27 02:52:21 PM
I don't think insurance companies should cover hurricane damage in a hurricane zone. Or fire damage in a fire zone. Or ice damage in an ice zone. Insurance should cover accidents, these "events" or "acts of god" or whatever are just what you get for moving into the neighborhood. You should know about them and prepare for it ahead of time, not expect someone to rebuild for you.

/dNrtfa
//stabby today
 
2009-01-27 02:58:25 PM
State Farm also doesn't sell auto insurance in Rhode Island. That's how I know the company is run by wise people.
 
2009-01-27 03:22:49 PM
Apik0r0s: Fark State Farm.

They ran me around in circles for almost a year on what should have been a routine payout.

My agent at one point screamed at me that I was the reason for high premiums, because I wouldn't accept an almost new car being rebuilt with junkyard parts - I demanded OEM because that's what I paid for.

They jerked me around like you wouldn't believe - one day I get a call that they have my check, 2 hours north of Atlanta. So I drive all the way up there wondering why they couldn't mail it but eager for my money. I get there and the twatwaffle has a check that is about 5000 dollars light. he plays dumb. My agent plays dumb. Everyone plays dumb but they tell me I need to sign for the check anyways - but the document they were asking me to sign said that by signing I would release them from all responsibility beyond the check they were trying to give me. When I refused to sign and tried to call my lawyer, the douchebags turned it around on me and threatened to call the police on me for fraud?!?!

My lawyer went after them pro bono after that, he was so disgusted. Got paid in full within a month and dumped them. Never had a problem since.

Consumerist Clark Howard has a rule - never buy auto insurance from a company that advertises. Good advice.


I am having a similar experience with Erie Insurance. Their policy holder hit my truck so hard it bent the frame (It was parked). They just bent it back and told me it was right as rain. The truck is now worthless. I have a lawyer. I'm suing the crap out of them. They're still dicking me around. I;m sure they will keep dicking me around until we actually file the paperwork at the courthouse. Anyways, state farm sucks but I doubt they suck anymore than anyone else. They are losing an assload of money in Florida thanks to the state government there. They should leave.
 
2009-01-27 03:26:44 PM
Diogenes: They're doing it wrong.

My mom's insurance company encouraged her to do upgrades. They even called her after our last big storm in the summertime to see how the house was.


Actually, the state has been keeping State Farm from adequate rate increases for a number of years, then mandates credits that drive that already inadequate premium even lower.

Your mom's insurer was not in the same position as State Farm with respect to their rate filings with the state.
 
2009-01-27 03:28:43 PM
AirForceVet: Which is why I don't use State Farm, even though I don't live in Florida presently. They're more into commitment-avoidance than customer service.


Florida's gov't, especially their policies regarding Citizens and the Reinsurance Fund, are extremely irresponsible.

I know people hate insurance, but speaking as someone who works in a related segment (reinsurance), the expansion of Citizens and the Reinsurance Fund was an idiotic move. The state does not bring in enough premium for Citizens to cover a major event and it has only funded the Reinsurance Fund for 1 or 2 major events a year, paying through the nose in order to get private Reinsurers (i.e. Berkshire) to fund additional amounts. Even so, the amount of capital in reserve isn't adequate for either a catastrophic hit or a very active year. A repeat of 2004 would drain both entities and leave the state on the hook for the billions in damages in excess.

Which, naturally, Florida won't be able to pay, thus forcing the Federal Gov't to step in and provide the funds.


/spending $1.21 for every $1.00 of premium intake is problem
//Florida's property rates are too low
///Don't like that? Tough. It's fact.
////That's the price you pay for having properties with those kind of values on hurricane prone coast.
 
2009-01-27 03:30:44 PM
You sell donuts - they cost 50 cents to make and you sell them for $1.00 - nice profit that. You sell 10 donuts a day and make a $5 profit. Every 30 days your donut frier bursts into flames and burns your $1000 shop to the ground. How much should you be selling your donuts for?

Hint: You are not allowed to charge more than $1 per donut because that would be unfair
 
2009-01-27 03:33:31 PM
jackbooty: I switched all my insurance and banking to USAA years ago and am never looking back.

You mean the same USAA that wrote this kind letter to its FL members:

Dear Florida Members,

I am writing to let you know that recent legislative and regulatory actions in Florida have created an untenable property insurance market in your state. Florida politics have severely restricted USAA's ability to charge adequate property insurance rates for the risk the association bears on behalf of its Florida members. These actions jeopardize our ability to protect the long-term viability of the association, as well as the assets of our members. Please consider the following facts:

1. Over the past 10 years, USAA has paid approximately $220 million more in Florida homeowner insurance losses and expenses than it has collected in Florida homeowner premiums.

2. Florida residents account for 49 percent of USAA's exposure to natural disaster risk, yet make up only 9 percent of USAA policyholders and pay 12 percent of USAA's property insurance premiums.

3. With more than $2 trillion in coastal property exposed to the risk of catastrophic hurricanes - and a history of frequent, strong storms across the state - Florida has the most challenging property insurance market in the country.

Therefore, the State of Florida has left us no choice but to take the following actions in order to limit potential future losses, and to protect the association and its members.

1. USAA will only provide new homeowner or renter insurance policies for the primary residences of active military members required to move to the state pursuant to military orders.

2. If your primary residence is in Florida and insured by USAA, USAA will continue to underwrite your existing homeowner or renter policy.

3. If your primary residence is located outside of Florida and insured by USAA, USAA will continue to underwrite one existing homeowner, fire, or renter policy in Florida.

4. Property insurance policies in Florida in excess of those cited above will be non-renewed upon written notice from USAA and in accordance with Florida's laws and regulations. We expect this change to affect about 10 percent of our 270,000 Florida members.

You can find more details in our Q&A.

We regret that Florida policymakers have forced us into this position, but without the ability to price insurance appropriately, it would be irresponsible to continue to place the entire association and its membership at risk. You may view a comparison of Florida homeowner insurance rates at FloridaToday.com. Additionally, you may wish to contact your state's lawmakers and regulators.

We value your membership in USAA, and will continue to serve your auto and life insurance, banking, and investment needs, as long as the State of Florida permits us to do so. If the Florida insurance market becomes more rational in the future, we will most certainly reconsider our position.

Sincerely,
Robert G. Davis


This issue at hand isn't an insurance company specific problem, but a problem with the states office of insurance regulation. The problem is most prevalent in companies with the largest market shares.
 
2009-01-27 03:35:09 PM
Sweet. My premiums go down and I stop having to subsidize people who choose to live in a permanent disaster area.
 
2009-01-27 03:38:13 PM
Fizpez: How much should you be selling your donuts for?

Hint: You are not allowed to charge more than $1 per donut because that would be unfairthe local donut regulator will not permit it.


It's nuance I know, but this whole situation is mired in it and the typical misinformation that local media provides continues to make it look different than it actually is.
 
2009-01-27 03:40:07 PM
Oh I forgot to add:

After the large carriers flee the state you will be left with much much smaller, undercapitilized carriers who will happily collect premiums for years and then promptly go bankrupt the next time a major hurricane smashes into the state. The Feds will declare a disaster area and we will ALL get to pay to fix those houses. Again.
 
2009-01-27 03:41:02 PM
For those that aren't familiar with state farm and florida, this is a good thing. The state had to sue them after Andrew and it looks like similar things are happening after Katrina in Louisiana just by skimming a few articles hoping to find a good history.
 
2009-01-27 03:48:17 PM
Fizpez: After the large carriers flee the state you will be left with much much smaller, undercapitilized carriers who will happily collect premiums for years and then promptly go bankrupt the next time a major hurricane smashes into the state. The Feds will declare a disaster area and we will ALL get to pay to fix those houses. Again.

Small problem with your idea here, though. The small carriers are required by the state (that now runs the future largest property insurer) to have much greater capitalization than that of the state run insurer. In the event of a catastrophic loss, I would hope to be insured by one of those smaller companies than by Citizens.
 
2009-01-27 04:00:56 PM
A company is in the business to make money, Florida as well as most of the Gulf coast is prone to disaster and well you don't make money by paying out claims.
On the consumer side, I have paid 10's of thousands of dollars to my insurance company over the years, the instant I have even the slightest claim my rates will go up.

/insurance=legalized extortion
//State Farm sucks
 
2009-01-27 04:01:26 PM
ckirchen1: Fizpez: After the large carriers flee the state you will be left with much much smaller, undercapitilized carriers who will happily collect premiums for years and then promptly go bankrupt the next time a major hurricane smashes into the state. The Feds will declare a disaster area and we will ALL get to pay to fix those houses. Again.

Small problem with your idea here, though. The small carriers are required by the state (that now runs the future largest property insurer) to have much greater capitalization than that of the state run insurer. In the event of a catastrophic loss, I would hope to be insured by one of those smaller companies than by Citizens.


I dont really care all that much unless/until large carriers are forced to raise MY premiums to cover distant areas of loss on a consistent basis. I live somewhere "safe" sure its not near a beach and its farking 14 degrees outside right now - but the risk of having my neighborhood wiped out in a single event is probably negligible. Sure my house might burn down but thats one house out of thousands - easily covered by my other nearby policy holders.

I am not saying people shouldnt live there either - hell if you can afford it, build your dream mansion on a mountain top in a forest fire prone, earthquake active-zone near an active volcano for all I care. But if its going to cost $300,000 to rebuild your house and replace the contents AND it is likely to be destroyed every 15 years - then you should expect to pay almost $2000 A MONTH for insurance - charging any less is financial suicide for the insurer.
 
2009-01-27 04:13:39 PM
Fizpez: I dont really care all that much unless/until large carriers are forced to raise MY premiums to cover distant areas of loss on a consistent basis.

That's really not what they do. See the insurers compartmentalize the costs (new window). Just because two insurers are part of the same holding company does not mean they share the same financing of risk. Those costs are borne on the cost center and when the cost center is no longer profitable or is collapsing on itself as is the case here they close the cost center. If you think those costs are burdened in your policy from wherever the hell you hail, you are mistaken. The spread of risk stops at the Florida state line in this case and it is going to affect your premium exactly 0.
 
2009-01-27 04:18:58 PM
A lot of insurance companies got burned by Hurricane Andrew back in 1992.
 
2009-01-27 04:21:18 PM
Fizpez: But if its going to cost $300,000 to rebuild your house and replace the contents AND it is likely to be destroyed every 15 years - then you should expect to pay almost $2000 A MONTH for insurance - charging any less is financial suicide for the insurer.

This is also why expecting health insurance to cover all your needed health care costs, including $500/month of drugs, for less than $200/person/month is foolish.

Insurance spreads the risk of loss around a larger pool, but if a certain amount of loss is a near or complete certainty, then you for damn sure can expect rates at least as high as just paying for the damage out of pocket. Be it homeowner's, auto, health, or any other kind of insurance, that's how it works. There's no way for something to suddenly be had for free just because "the insurance pays for it."
 
2009-01-27 04:30:02 PM
Devin172: I know people hate insurance, but speaking as someone who works in a related segment (reinsurance), the expansion of Citizens and the Reinsurance Fund was an idiotic move. The state does not bring in enough premium for Citizens to cover a major event and it has only funded the Reinsurance Fund for 1 or 2 major events a year, paying through the nose in order to get private Reinsurers (i.e. Berkshire) to fund additional amounts. Even so, the amount of capital in reserve isn't adequate for either a catastrophic hit or a very active year. A repeat of 2004 would drain both entities and leave the state on the hook for the billions in damages in excess.

Which, naturally, Florida won't be able to pay, thus forcing the Federal Gov't to step in and provide the funds.


We have the same sort of thing in NC. The so called "Beach Plan" for insuring property on the coast has cash assets of $700 million plus $1 billion in reinsurance.

Current value of the property covered by the plan: $69 billion.

Hell, I have a lib'rul arts degree and I can figure that out. This is a scam to allow continued overdevelopment on the barrier islands AND the so-called Inner Banks (along the tidal riverfronts) at the ultimate expense of the taxpayers.

So a good Cat-4 or even a Cat-2 with a sufficient tidal surge (like Hurricane Isabel) can roll up the coast from Florida to Hatteras and essentially bankrupt several states' insurance systems.

Hope you folks in Kansas enjoy paying for someone else's vacation home.
 
Ant
2009-01-27 04:48:46 PM
gadian: Insurance should cover accidents, these "events" or "acts of god" or whatever are just what you get for moving into the neighborhood.

Maybe they shouldn't cover "acts of God" in a God zone
 
2009-01-27 05:27:51 PM
Screw State Farm. I've had them for 2.5 years on my home now, and they're raising premiums by 17% for no reason. No changes to the policy, no claims on this policy, no claims for me and my wife EVER on any policy (auto, home, or renters), and our credit rating has only improved. I called my agent to complain, and he didn't really give any reason either, other than, "Gee, the re-insurance is more expensive."

I'm shopping around now - any suggestions for CT?
 
2009-01-27 06:25:02 PM
If you take a look at insurance company premium increases over the past few decades, you will notice a correlation between them losing their asses in the stock market and them charging you more for your coverage.

In 2005, after Katrina and Rita, the insurer still made record profits after reserves for those enormous loses.

However, this year they were playing craps with your premium dollars and lost, so you get to pay so they can catch up.
 
2009-01-27 06:33:48 PM
I had USAA homeowner's insurance on my house in central Florida. A heavy rain storm came through and our large honeybell orange tree uprooted and fell over against the house. I called USAA to report it and was told that they wouldn't cover the incident because the tree fell for the wrong reason. You see, it was just a heavy rain storm -- there weren't any gusting winds to blow the tree over. If there had been strong winds, they would have covered it. Seriously.
 
2009-01-27 07:24:40 PM
I've had State Farm for about a decade for my vehicles, and about 5 years for my house. Filed a couple auto claims with them, accidents were other people's fault. Never had any problem or hassle, my agent knows my name and asks how my kids are doing.

/I love State Farm
//YMMV
 
2009-01-27 08:57:53 PM
My problem with state farm (no I don't have them, but I do live in FL) is that they were asking for a 47% increase in rates and the state said no. Especially when other smaller insurance companies actually lowered their rates. My insurance actually went down about 5%. When state farm policy holders are already paying more than I am, and they want to increase rates as much as they wanted to, I have a problem with that. Now I don't blame insurance carriers for wanting to raise the rates for those near the beach, but those of us inland, by the time a hurricane hits us in orlando it's usually died down to a tropical storm. Dangerous still, yet nowhere near as bad.
 
2009-01-27 09:46:28 PM
I have been with SF for over 25 years and have never had a problem with them. Had a couple of car accidents and my rates did not increase. Of course this was back in 88-89.
Now I have my house and car with them. Not sure I like their policy of giving a 50% discount for being claim free on the house insurance. 1 claim and wham your next premium payout is going to hurt.


/has no sympathy for hose that build in near shore in hurricane zones.
//has relatives in Florida. None live near shoreline.
 
2009-01-27 09:47:19 PM
hose = those. Bad fingers bad.
 
2009-01-28 12:03:36 AM
Looks like we got out of Florida just in time.

This going to be murder on real estate values (my insurance premium each month was a third of the total mortgage payment for our house in Florida, and we were 15 miles from the coast and outside of the 500-yr flood zone). As someone mentioned, Florida will see a rash of fly-by-night insurance agencies there to make a buck and disappear when the next big hurricane hits.
 
2009-01-28 07:50:55 AM
I have paid close to $7K in homeowners premiums in the last 5 years and have not had one claim.
 
2009-01-28 09:02:33 AM
Pick: I have paid close to $7K in homeowners premiums in the last 5 years and have not had one claim.

If it's such a ripoff, then don't buy it.

I spend almost that much a year for insurance, and it's the price you pay to live in this stripper and sunshine paradise.
 
2009-01-28 09:07:53 AM
Jacobin: If you take a look at insurance company premium increases over the past few decades, you will notice a correlation between them losing their asses in the stock market and them charging you more for your coverage.

Wow, I don't recall hearing anyone complaining when they were simply making investment profits that offset the total undewriting losses. They become bad people when they choose to set premiums equal to an underwriting profit.

In 2005, after Katrina and Rita, the insurer still made record profits after reserves for those enormous loses.

Uh, no. No they didn't. 2005 is when those regional insurers lost their asses. Claims from Katrina in Mississippi alone totaled $13.6 billion. Homeowners insurance losses in the state wiped out approximately 17 years worth of premiums and every dime of profits those insurers had ever earned in the history of the state. In Louisiana, the $10.9 billion dollars in insured homeowners losses were equivalent to 25 years worth of premiums Link (new window). Not profit, premium. 2006 reported record profits. Far be it for you to understand that changes in catastrophe modeling will do that.

However, this year they were playing craps with your premium dollars and lost, so you get to pay so they can catch up.

No, the difference is that instead of making the primary share of their income through the investment of premium dollars, they are now underwriting to a profit since they cannot consistently rely on the market to provide them with their income.

Danimal79: My problem with state farm (no I don't have them, but I do live in FL) is that they were asking for a 47% increase in rates and the state said no. Especially when other smaller insurance companies actually lowered their rates. My insurance actually went down about 5%. When state farm policy holders are already paying more than I am, and they want to increase rates as much as they wanted to, I have a problem with that. Now I don't blame insurance carriers for wanting to raise the rates for those near the beach, but those of us inland, by the time a hurricane hits us in orlando it's usually died down to a tropical storm. Dangerous still, yet nowhere near as bad.

The difference between the smaller company and State Farm is in their state filed underwriting guidelines. A small and newer insurer typically has more rigid criteria on the insurability of a home(i.e. age limitation, types of construction, distance to tidal water, etc.) than that of insurers that have weathered sets of storms. They aren't in the same boats. Since you mention the fact that their premiums are more(by what basis of comparison I don't know), then the issue would settle itself naturally. If their prices are too high, then no one buys their product. So then, why does the state have to dictate that State Farm cannot charge more? If State Farm wasn't needed, and needed at the price of 47% less than what State Farm needed on order to turn a profit here, then why wouldn't the state let State Farm increase their rates to where they wanted? It doesn't make sense and looks like an intentional reduction of competition.

So now State Farm is going away. Nationwide has gone away. The state is slowly eroding competition while the state(supposedly the insurer of last resort) is becoming the state's largest insurer and doing so with unsound rates. The have $11billion in assets with an exposure of $485billion in losses. They have not purchased any reinsurance. The backup plan right now is crossed fingers. With the state of the financial markets what it is, they won't be able to finance a catastrophe post loss. They know it and they don't care. One cat 3 hurricane in one of 3 places and the state will have bankrupted itself.
 
US1
2009-01-28 09:33:42 AM
Debeo Summa Credo: Good for them. They have no obligation to write policies at a loss.

Crist will drive private insurers out of Florida, then a big hurricane will hit and it will all be on Citizens (i.e., taxpayers).


wateva; how the hell are they loosing money when there hasnt been a hurricane?
 
US1
2009-01-28 09:42:27 AM
fernanernie: A company is in the business to make money, Florida as well as most of the Gulf coast is prone to disaster and well you don't make money by paying out claims.
On the consumer side, I have paid 10's of thousands of dollars to my insurance company over the years, the instant I have even the slightest claim my rates will go up.

/insurance=legalized extortion
//State Farm sucks


BS, they lost money on investments. now they are trying to stick it to the insurance holders. That is as plain to see as anything. they are pissed that they couldnt bully the governor.
 
2009-01-28 09:45:05 AM
US1: how the hell are they loosing money when there hasnt been a hurricane?

In good years(with actuarially sound rates) about $0.90 of every $1 is paid out in claims. There hasn't been a hurricane, but there have been fires, sinkholes, vandalism, thefts, lightning, and liability losses.
 
2009-01-28 10:17:17 AM
US1: BS, they lost money on investments. now they are trying to stick it to the insurance holders. That is as plain to see as anything.

Show me. Show me that their investment losses were $200mil over the first three quarters of 2008. Start here: 2nd petition of State Farm to the OIR (new window).
 
2009-01-28 02:22:09 PM
The_Eliminator: Screw State Farm. I've had them for 2.5 years on my home now, and they're raising premiums by 17% for no reason. No changes to the policy, no claims on this policy, no claims for me and my wife EVER on any policy (auto, home, or renters), and our credit rating has only improved. I called my agent to complain, and he didn't really give any reason either, other than, "Gee, the re-insurance is more expensive."

I'm shopping around now - any suggestions for CT?



Uh, that IS the answer. Just seemed to have gone over your head.


/Reinsurance is about 30-35% more expensive this year than last
 
2009-01-28 10:53:43 PM
Check Liberty Mutual. I dunno if they write insurance in Florida in general, but my partner works with them. I pay about a third of what some co-workers pay with State Farm. Just switched to their auto insurance as well, they were about $500/year cheaper than Geico.
 
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