State Farm agents are anxious about what happens next

Feb 12, 2009

They face a fuzzy future after the company’s Florida declaration.

By David Bauerlein
Florida Times-Union–February 12, 2009

State Farm agent Craig Dewhurst describes the mood of his fellow agents by recalling the upheaval of 1992 when Hurricane Andrew slammed South Florida.

“I can only relate it with how agents felt then,” he said Wednesday. “There was a whole lot of uncertainty after Hurricane Andrew.”

This time, the storm is State Farm Florida’s announcement it intends to withdraw from the state’s property insurance market over a two-year period.

Property insurance is a big part of the business for State Farm agents in Northeast Florida. Dewhurst said about 45 percent of his business is property insurance.

“It’s definitely going to be a significant hit for the agents,” he said.

In Northeast Florida, State Farm Florida is far and away the biggest seller of property insurance, accounting for 25 percent of all policies, according to state figures. USAA, which caters to policyholders affiliated with the military, is second at 5.3 percent, reflecting Jacksonville’s status as a Navy town. State-backed Citizens Property Insurance Corp. is third with 5.1 percent of policies.

In contrast, Citizens tops the statewide list with about 19 percent of all property insurance policies. State Farm is second with a market share of 15 percent.

The difference between Northeast Florida and the statewide figures reflects the fact State Farm has not dialed back property coverage here as much as it has elsewhere, such as in South Florida and counties around Tampa and St. Petersburg.

The question looming over State Farm agents, who are independent contractors for the company, is what options they’ll have for customers after existing State Farm property insurance policies go away over a two-year period.

Florida Chief Financial Officer Alex Sink asked State Farm to let its agents sell property insurance issued by other companies. She said in a Feb. 3 letter that would give the 826 agents statewide the ability to keep serving their customers at agencies that employ a total of about 4,480 staff members.

State Farm spokesman Phil Supple said letting its agents market products of other insurance companies would fundamentally change how the company does business.

“The relationship we have with our agents is a two-way street that benefits both parties and our customers č State Farm agents only sell our products, and we sell our products only through them,” he said.

However, State Farm is working with state regulators on a process for existing State Farm customers to move to other companies approved by the Office of Insurance Regulation. State Farm agents would continue to service the property insurance policies from the other companies, he said.

State Insurance Commission Kevin McCarty wants to make sure the withdrawal plan doesn’t result in State Farm policies being “dumped into Citizens,” said spokesman Ed Domansky.

But those customers could choose to leave State Farm altogether because there would be no requirement to stick with State Farm for servicing the property insurance from other companies. The migration to other agents would heighten the competition for auto insurance, which State Farm will continue selling in Florida.

Dewhurst said he expects State Farm agents would cut back on their staffs, and some agents would retire. Dewhurst, 42, said he’ll need to retool his agency, which he started nine years ago and is located in World Golf Village.

Customers “like to have a one-stop shop,” he said. “It’s just tougher today to have one company and one brand handle all your business.”