Don’t Give Up Your State Farm Policy Yet, Say Finance Advisors
Feb 12, 2009
National Underwriter--February 12, 2009
A Florida trade group called yesterday for halt in what it said were efforts to create paranoia and make property owners shift home insurers.
The statement came from National Association of Insurance and Financial Advisors-Florida which said efforts were being made to encourage policyholders to give up highly rated property insurance policies based on misinformation.
NAIFA’s announcement came on the heels of State Farm’s announcement that it has requested to begin withdrawing from the state’s home insurance market in what it said would be a two year process. It also follows a statement by a Florida Hurricane Catastrophe official that the fund is $18 billion short of its required $29 billion capacity to backstop insurers.
The shortfall could cause problems for small insurers who rely on the state fund reinsurance in order to secure required financial strength ratings.
NAIFA referred to published reports that the state’s Hurricane Catastrophe Fund “likely will be woefully underfunded and drastic action is taking place to shore it up or reduce its size.” NAIFA said “numerous agent advertisements have appeared statewide exploiting the uncertainty.”
“It is the height of irresponsibility to use this situation to create paranoia and induce people to make decisions that are irreversible and potentially damaging. State Farm has made it clear that nothing will be done on this matter until after hurricane season and most Floridians won’t have to make decisions on coverage for months or even years after that time,” said a NAIFA spokesman, Bob Lotane.
While State Farm is leaving the property insurance business, the agent with whom policyholders have developed relationships is staying, and they will be providing new property insurance options for present policyholders, said NAIFA.
The organization noted that Insurance Commissioner Kevin McCarty’s office has been working “feverishly with elected officials and company representatives to provide Floridians a glide path into new coverage.”
“By maintaining the highly rated coverage policyholders now possess, Floridians are not herded into buying policies that could be drastically affected by the problems percolating at the CAT Fund. Down the road when new coverage options need to be applied, hurricane season and the challenges faced by the CAT Fund should be a distant memory,” the group said.
NAIFA noted that in coming months much about the insurance marketplace will depend on action at the federal level, in the Florida Legislature, and in global financial markets.
Persons are encouraging policyholders who have secure coverage “to make dangerous decisions is fiscally irresponsible. Last year the CAT Fund admitted that it likely could not find adequate funds had a major hurricane(s) hit, and this year it says the situation is even worse,” said NAIFA.
The group cautioned Florida residents not to make hasty or angry decisions that it said may be irreversible and financially catastrophic.
State Farm policyholders, NAIFA said, should consult with their State Farm agent who, “while not party to decisions made by the insurance company, still has the knowledge and skill to protect the policyholders’ long-term interests and who will be able to provide new, secure options down the road.”