PRESIDENT, NAIFA FLORIDA: Insurance companies–Kicking them is self-defeating
Feb 16, 2009
Florida Times-Union–February 15, 2009
Many politicians, editorialists and citizens have weighed in on the recent decision by State Farm to withdraw from Florida’s property insurance market.
Some of the comments have derided State Farm and some of these came long before the announcement. These comments sometimes emanate from a lack of understanding of the issues and, unfortunately, others come from people who know better.
Gov. Charlie Crist has said that Florida is better off without State Farm; he says the policies will be picked up by a group of new smaller insurers or the state’s insurer, Citizens Property Insurance Company (Citizens).
The national A-rated companies have been reducing Florida business for years. State Farm is just the latest and largest example.
Imagine if all of these A-rated companies had similarly withdrawn prior to the 2004-2005 hurricane seasons and the policies transferred to these new smaller insurers with minimal capital and experience or to Citizens.
The 2004 hurricanes, alone, wiped out the substantial reserves of many of the A-rated companies. State Farm and Allstate were effectively bankrupt.
Fortunately, the parent companies sent billions to recapitalize and handle claims. When these new insurers’ reserves are gone, so are they. Their claims would be our responsibility through taxes imposed by the state guaranty association.
The unassailable fact is that Florida has 1,200 miles of coastline on two different bodies of water, which juts right down the middle of hurricane alley. We have $2 trillion in property exposure. We need every type of insurer we can attract and retain.
We have seen officials of both our catastrophe fund and Citizens unveil numbers showing if significant hurricanes had hit us in 2008, they would likely not have been able to pay Floridians’ claims in a timely manner. And this year could be worse.
It is not too late to change the dangerous path on which we find ourselves. I strongly urge our political leaders and regulators to take a deep breath and work to change the worsening relationship with the insurance industry. No less than the solvency of the state is at risk.
TOM COTHRON, Florida president, National Association of Insurance and Financial Advisors, Ocala