January 29, 2009
State Farm Insurance Cos. will drop all homeowner insurance policies in Florida because it is prohibited from raising rates to cover its costs.
The Bloomington (Ill.)-based mutual insurer—the second-largest homeowner insurer in Florida with more than 700,000 policies in force—was rebuffed by state regulators recently when it sought a 47 percent rate increase in Florida.
The following comments from insurance experts may be quoted or you may contact the sources directly for additional information.
“State Farm’s departure from the Florida homeowners market should come as no surprise to anyone familiar with the way the state regulates insurance. Florida insurance regulators, along with Governor Crist and many in the legislature, have created an adversarial relationship with insurers over how insurance rates are determined. Florida’s rate regulation system, which requires state approval of any rate changes, stifles the ability of insurers to react to market forces, creating a hostile business environment and depriving consumers of the benefits of competition. This caustic atmosphere has discouraged new providers from setting up shop in-state, and now has driven out one of the nation’s leading insurers, leaving fewer options for homeowners and driving even more consumers to the state-run Citizens Property Insurance Corporation.”
Legislative Specialist, Insurance and Finance
The Heartland Institute
“The only thing that surprises me about State Farm pulling out of Florida is that it took this long. Florida lawmakers have been meddling in the insurance market for a long time, doing everything they can to keep homeowners from bearing the true cost of living in hurricane zones. This happens in every market where government tries to protect people from insurance costs. Government forces insurers to lose money, which eventually drives them out, making it more difficult for people to buy insurance at any price. It’s happened in auto and homeowners and workers compensation markets in many states over the years and undoubtedly will continue to happen, because lawmakers seem not to learn that competition, rather than government restrictions, helps insurance buyers.”
Editor, Budget & Tax News
The Heartland Institute
“This is a major blow to Florida consumers, but it isn’t surprising. State Farm tried very hard to stay in a market that just doesn’t work. This shows that Florida needs to work hard and allow the free market to play a bigger role in Florida’s insurance industry.”
Competitive Enterprise Institute