TALLAHASSEE, Fla. – Aug. 19, 2009 – State Farm, Florida’s largest private property insurer, plans to leave the state. Major insurers, including Nationwide, Allstate and State Farm, have dropped more than 350,000 policies in recent years. And state regulators have licensed more than two dozen new insurers in just the past three years.
Now, perhaps more than ever, it’s important to know how to shop for insurance. Even though the current hurricane season has been quiet, Florida’s stormy property insurance industry is undergoing rapid changes.
And even if you’ve had the same insurer for years, consumer advocates say it’s a good idea to do some comparison shopping.
Here’s why: State Farm plans to shed its 1.2 million property insurance policies, including about 900,000 residential policies, by the end of 2011. The company hopes to resolve a dispute with the state about its exit plan at hearings in October.
“I haven’t had to shop for insurance in 30 years,” said former State Farm policyholder Chuck Clymer, a retired homeowner in Lake Worth, after the insurer’s announcement. Soon after, Clymer said he found a new home insurer even though he was reluctant to drop his State Farm policy.
“I don’t care how many Florida companies there are. At some point, these companies are going to reach their limit and say, ‘We’re not going to take any more (customers)’”, Clymer said.
Florida Insurance Consumer Advocate Sean Shaw said last week that State Farm policyholders should “start looking as soon as possible.” The company plans to eliminate certain discounts starting in November.
That “is essentially a rate increase,” Shaw said. “Consumers should shop around to make sure they are getting the most coverage for their premium.”
To help you get started, here are some answers to common questions from Sun Sentinel readers on shopping for home insurance.
Some Florida insurers stopped selling new policies or dropped customers after the 2004 and 2005 hurricanes. What insurance options do South Florida homeowners actually have?
In short, there are many options. Since 2006, the Florida Office of Insurance has licensed more than 28 new home insurers with more than $1.1 billion in capital. That doesn’t include eight existing insurers that have added home coverage to their offerings since 2006.
But insurers limit how many homes they’ll cover in any one area so you may need to do a broad search contacting many insurers or multiple insurance agents about coverage and costs.
When should State Farm policyholders switch to new insurers?
Insurance companies can issue new policies during hurricane season, unless there’s an active storm or storm watch, but consumer advocates say it’s best to wait until the season ends on Nov. 1. That’s also when State Farm can start eliminating some of its discounts and its statewide rates are expected to increase by an average of 28 percent.
State Farm plans to shed its policies over the course of two years and only when policies are up for renewal. They must warn customers their policies will be dropped 180 days before it happens.
What’s the best way to start shopping for property insurance?
Check out which insurers have the most policies in your county, their contact information and a comparison of their rates for two particular types of homes at the state’s Shop and Compare Rates website, http://shopandcomparerates.com.
Consider trying the state’s free referral service, the Florida Market Assistance Program. It matches customers who can’t find property insurance with licensed agents and insurers selling new policies.
Enlist the help of one or more independent insurance agents, an agent that sells policies for multiple companies. You can find one by searching the Florida Association of Insurance Agents website, http://faia.com/Custom/agentlocator.aspx.
Are national insurers better than Florida insurers?
National insurers theoretically can spread risks over a broader range of policyholders but most in Florida don’t have that advantage. That’s because they created Florida-only subsidiaries to protect policyholders in other states from Florida’s hurricane risks.
Established companies – whether they’re local or not – have the advantage of experience and a track record. That said, you should aim for an insurer that offers you the most coverage for the best premium.
How do you assess the quality of an insurer?
Ask relatives, neighbors and friends about their experiences with particular insurers. Ask your agent to check ratings done by A.M. Best, Demotech and other rating agencies for insurers you’re considering. Rating agencies typically evaluate the financial health of an insurer by examining, among other things, how much cash it has compared to its potential risk. Some rating agencies provide summaries of their evaluations on their websites.
You also can check an insurer’s license and financial health because all fully regulated insurers are carefully vetted by the Florida Office of Insurance Regulation, and there is a state backup fund that handles claims in case an insurer folds.
Licensing and financial information for insurers can be found on the websites of the insurance regulation office, http://fldfs.com, and the National Association of Insurance Commissioners, http://naic.org.
The Florida Department of Financial Services tracks insurance policyholders’ complaints. Look up the complaints at SunSentinel.com/insurance.
Consumers with questions also can call the state’s insurance consumer help line at 850-413-3089 or 877-693-5236.
Copyright © 2009 Sun Sentinel, Fort Lauderdale, Fla
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