Farmers Insurance pulls out of Florida, affecting 100,000 policyholders
New York
CNN
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Farmers Insurance will stop offering its insurance policies in Florida, including home, auto and umbrella policies, in a change that will force thousands of people to switch insurance providers.
The company said in a statement that the decision to get out of Florida was a business decision necessary to manage risk exposure in the hurricane-prone state. Farmers serves 100,000 customers in Florida, but said there will be no impact on customers who use Farmers-owned subsidiaries such as Foremost Signature and Bristol West.
“Such policies will continue to be available to serve the insurance needs of Floridians,” Farmers Insurance spokesperson Trevor Chapman said in a statement. “Affected customers will receive notifications of when their coverage ends and will be advised of replacement coverage options.”
National insurers do not have a large presence in Florida, including Farmers, which has barely a 2% share of the state’s insurance market. Florida requires that affected policyholders receive a 120-day notice that their policies will not be renewed.
“In the past 18 months in Florida, 15 home insurance companies have placed moratoriums on writing new business, four carriers have announced plans to voluntarily withdraw from the market and seven companies have been declared insolvent,” Mark Friedlander, a spokesperson for Insurance Information Institute. told CNN. “Currently, there are 18 Florida home insurance companies on the state regulator’s watch list due to concerns over their financial health.”
In addition to extreme weather, insurers in Florida point to a legal system they say has fostered litigation abuse and excessive claims.
“This is a man-made crisis,” Friedlander previously told CNN.
The insurance industry pushed for and won a series of reforms meant to curb what it saw as abuses, but so far that hasn’t changed the outlook for insurers, in part because of a flood of nearly 300,000 lawsuits that the Insurance Information Institute said were filed just before the law came into force.
“It will muddy the market for years to come,” Friedlander said. “That volume of lawsuits will drive more of these regional companies out of business. The laws have changed. The market conditions haven’t changed. It’s still a mess.”
Florida’s location and low elevation make it particularly vulnerable to hurricane damage. The Atlantic hurricane season is projected to be normal this year, according to the National Oceanic and Atmospheric Administration, with a 30% chance of an above-normal season, and a 30% chance of fewer than normal hurricanes.
Last year was a bad year. Hurricane Ian in late September caused $114 billion in inflation-adjusted damage, according to NOAA, making it the costliest storm ever to hit the state, and the third costliest in U.S. history behind 2005’s Katrina and 2017’s Harvey.
Earlier this week, Farmers limited new homeowner insurance policies in California due to high costs and wildfire risk. State Farm and Allstate also made similar changes in that state.
