State Farm requesting hearing on Florida exit terms

TALLAHASSEE, Fla. – March 9, 2009 – State Farm Florida asked for a hearing Friday to appeal the state’s conditions for the company’s planned exit of Florida’s property insurance market.Meeting Friday’s deadline, State Farm said, was a preemptive move in case a major disagreement with the state surfaces later. A plan may be worked out before there’s ever a hearing.State Farm Florida Insurance Co. in January announced it would drop its 1.2 million property insurance policies because it said it’s not collecting enough in premiums to keep pace with claims and other expenses.State Farm, which has more than 120,000 property insurance policies in Broward and Palm Beach counties, and the Office of Insurance Regulation are working out a plan to shift policies to other insurers over the next few years.“We’re hopeful we can reach an agreement because we both ... want a smooth transition” of the policies, State Farm spokesman Chris Neil said.The insurance regulation office “will review the petition carefully and, at the same time, we’ll continue to work with State Farm to place its customers into other private companies,” office spokesman Ed Domansky said.State Farm has said it’s losing about $20 million each month on its property insurance business in Florida, in part because of hefty discounts it provides to customers that fortify their homes against hurricanes. State Farm said the company needed rate increases – of 47 percent or 67 percent on an average statewide basis – that the state rejected.State Farm plans to shed its policies – which cover homes, boats, businesses, and condominium and apartment units – over two years when customers are up for renewal. The company must provide 180 days’ notice.In a 76-page petition filed to the Division of Administrative Hearings, State Farm disputes Florida Insurance Commissioner Kevin McCarty’s authority to set requirements that the company:• Continue paying certain taxes and fees for one year after its last policy is dropped.• Pay for the advertising needed to implement the withdrawal plan.• Submit an alternative plan for providing discounts for homes that are fortified against hurricanes. A primary reason State Farm said it needed the rate increase was to offset the discounts’ hit on its claims-paying fund.In addition to specific areas of contention, State Farm also challenged the extent of McCarty’s authority to block its departure or set stringent requirements in the first place.State law said McCarty should approve an insurer’s departure so long as it isn’t hazardous to policyholders or the public.Copyright © 2009s Sun Sentinel, Fort Lauderdale, Fla., Julie Patel. Distributed by McClatchy-Tribune Information Services.