2023-07-12 18:41:00
(CNN) — Farmers Insurance will stop offering its policies in Florida, including home, auto and general policies, in a decision that will force thousands of people to change providers.
The company said in a statement that its decision to leave Florida was business-oriented and necessary because of its exposure to risk in a state that is prone to hurricanes. Farmers has about 100,000 customers in Florida, and he clarified that customers using Farmers-owned subsidiaries such as Foremost Signature and Bristol West will not be affected.
“These policies will continue to be available to meet the insurance needs of Floridians,” Farmers Insurance spokesman Trevor Chapman said in a statement. “Affected customers will receive notifications detailing when their coverage will end and inform them of options to replace it.”
National insurers do not have a significant presence in Florida, including Farmers, which has just a 2% share of the state’s insurance market. Florida requires that affected policyholders receive a 120-day notice before the end of their policies.
“During the past 18 months in Florida, 15 homeowners insurers have suspended underwriting new business, four insurers have announced plans to voluntarily withdraw from the market, and seven companies have been declared insolvent,” Mark Friedlander, a spokesman for the Insurance Information Institute, told CNN. . “There are currently 18 Florida residential insurers on the state regulator’s watch list due to concerns about their financial health.”
In addition to the extreme weather, Florida insurers point to a legal system that they say promoted abuse of litigation and excessive claims.
“This is a man-made crisis,” Friedlander previously told CNN.
The insurance industry pushed through and won a series of reforms aimed at curbing what they viewed as abuses, but so far the outlook for insurers hasn’t changed, in part due to a spate of nearly 300,000 lawsuits that the Insurance Information Institute said they were filed shortly before the law went into effect.
“That will cloud the market for years to come,” Friedlander said. “That volume of lawsuits will drive more of these regional companies out of business. The laws have changed. But market conditions haven’t. It’s still a mess.”
Florida’s location and low elevation make it particularly susceptible to hurricane damage. The Atlantic hurricane season is projected to be normal this year, according to the US National Oceanic and Atmospheric Administration (NOAA), with a 30% chance of a worse-than-normal season and a 30% chance of fewer hurricanes than normal.
Last year was a bad year. Hurricane Ian, in late September, caused $114 billion in inflation-adjusted damage, according to NOAA, making it the costliest tropical cyclone to hit the state and the third costliest in US history. USA, after Katrina, in 2005, and Harvey, in 2017.
Earlier this week, Farmers limited new homeowners insurance policies in California due to high costs and wildfire risks. State Farm and Allstate also made similar changes in that state.
CNN’s Chris Isidore contributed to this report.
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