[Breaking] State Farm pulling out of Florida for ALL Homeowners insurance

[DisneyBamaFan]

So it's State Farm's customers' fault that they are pulling out of Florida? I understand SF doing what it needs to do to stay profitable (even if I don't like it) but I don't think it's the customers' fault. SF could get more money elsewhere, or the risk was less elsewhere, so they pulled out. I don't think the customers could do anything one way or another to affect the decision.

If you buy a home in a flood plain, you may not be able to buy flood insurance. Why? Because only the government sells flood insurance, and even they have decided not to cover homes in some areas.

Now, why is flood insurance only available from the federal government? Because it loses money. Only our government is willing to take on that type of business, because they have the deep pockets of the American taxpayer to cover their losses...

 

[Mikelly1221]

Not just State Farm's customers' -- customers-as-a-whole, and voters through the actions of the appointees of their elected officials to regulatory oversight positions, determine whether or not it is worthwhile offering insurance in a state. Again, if we customers must have fault, then take it onto ourselves.

I think folks should have refrained from trying to blame State Farm.

I think they could have been willing to pay higher premiums.

Because insurance here is such a huge issue, my first gut reaction was angry thoughts toward State Farm. But, I do understand how companies work. At the end of the day, it'll be the consumer that gets squeezed, between either higher premiums (which people on a very tight budget may not be able to handle) or no companies in Florida.

Again, it's a lose/lose for the customer.

 

[Mikelly1221]

Frankly, I am amazed that Floridians can get homeowners insurance that covers storm damage at any cost. If someone just has to live there, why should anyone else pick up a portion of their risk?

Believe it or not, for some of us, this is our home. We have lived here our whole lives and it means as much to us as your home means to you.

SF has to do what they have to do. Customers have 2 years to find another insurer. I hope they can, and I hope (as a non-SF customer) that a domino effect doesn't happen.

 

[Amii]

At least people are getting a 2 year notice. My wife and I discovered that we needed to find a new home insurance company when we had a check returned to us. So we called and were told that they were out of business. No notice no nothing. We wound up going with the state's plan because so many companies are no longer writing policies for the Cape.

We live on the Cape and our house insurance company refused to renew our policy last year. They let us know they were pulling out of the Cape after I sent in my renewal papers and a check. We had to get the state's plan also. We couldn't find another company to cover us because of coastal erosion concerns. We live 7 miles from the ocean.

 

[Feralpeg]

State Farm considers Florida high risk. What about Texas? Louisiana and the other gulf states? Will they be next? What about the northeast? They've had a lot of damage from ice storms over the past couple of years. California? Fires must make it difficult for the insurance companies.

As it has always been, insurance companies are great when we are paying them. When they have to start paying claims, they can't handle the loss. What happened to all those years Floridians paid in without any hurricane losses?

 

[Amii]

Frankly, I am amazed that Floridians can get homeowners insurance that covers storm damage at any cost. If someone just has to live there, why should anyone else pick up a portion of their risk?

I doubt there is any place in the US that isn't at risk for one type of disaster or another.

 

[DisneyBamaFan]

I doubt there is any place in the US that isn't at risk for one type of disaster or another.

LOL - but the risks are not even close to the same everywhere...

 

[DisneyBamaFan]

Believe it or not, for some of us, this is our home. We have lived here our whole lives and it means as much to us as your home means to you...

I understand, but I left Alabama so I could provide a better life for my family. Sometimes you have to make difficult choices. Choosing to stay could mean risking complete loss with no insurance if Florida has another bad hurricane season anytime soon, and no reasonable person would blame the insurance companies for leaving...

 

[bicker]

Again, it's a lose/lose for the customer.

Insurance is, by definition, a lose/lose for the customer. By definition, insurance companies need to cover the insurance payouts, cover their operating costs, plus earn a profit in excess of what they could make investing their assets in other ways. Therefore, again by definition, how much customers get in insurance payouts must necessarily be less than how much they pay in premiums.

 

[DisneyBamaFan]

Insurance is, by definition, a lose/lose for the customer. By definition, insurance companies need to cover the insurance payouts, cover their operating costs, plus earn a profit in excess of what they could make investing their assets in other ways. Therefore, again by definition, how much customers get in insurance payouts must necessarily be less than how much they pay in premiums.

You are not thinking about insurance in the right way. The consumer is supposed to hope that he never has to make a claim. Why? Because that means that the item that was valuable enough to pay to insure has not been damaged. We should all hope that we never have to make a claim and that insurance companies make money hand over fist. When they do, their rates drop and we are safe.

Insurance allows you to spead your risk over a group of thousands of people. If one of you has a loss, it takes the premiums of thousands to pay for the repair. So, just because you don't put in a claim doesn't mean that your premiums weren't paid out elsewhere.

And, without insurance, you wouldn't have a home to risk, because a bank wouldn't give you the time of day...

 

[bicker]

As it has always been, insurance companies are great when we are paying them. When they have to start paying claims, they can't handle the loss.

I think there is a general misconception about insurance. Selling homeowners or auto insurance is not a form of gambling by the underwriter (nor should it be gambling on the part of the insured). Rather, such insurance is a service whereby insureds can rest assured that they will be protected from the costs of losses, should they incur such losses, when such losses would be in excess of what insured can, or wishes to, pay out of their own resources. Specifically, big homeowners or auto insurance pay-outs would necessarily be balanced with a significant number of insured who make no claims.

I think part of the confusion stems from the existence of insurance like dental coverage, some of which isn't really insurance. If there is a specific amount of money that an insurance company will always pay-out for practically every insured, then that's not really insurance. Rather, it is simply pre-payment. Homeowners and auto insurance are such that there is an expectation that insured could go year, perhaps their entire lives, without getting a pay-out.

 

[bicker]

You are not thinking about insurance in the right way.

Actually, I'm thinking about insurance the way it is.

The consumer is supposed to hope that he never has to make a claim.

Of course. That has nothing to do with the statement you replied to (nor did anything else you said in your reply, as far as I can tell).

 

[DisneyBamaFan]

I think there is a general misconception about insurance. Selling homeowners or auto insurance is not a form of gambling by the underwriter (nor should it be gambling on the part of the insured). Rather, such insurance is a service whereby insureds can rest assured that they will be protected from the costs of losses, should they incur such losses, when such losses would be in excess of what insured can, or wishes to, pay out of their own resources. Specifically, big homeowners or auto insurance pay-outs would necessarily be balanced with a significant number of insured who make no claims...

And insurance companies create "pools" in which premiums from a specific risk group are placed and allocated for claims. Those pools must all operate at least break even independantly. That is why premiums are higher for some risks and areas than others - because the money is going into a higher risk pool and there is a higher likelihood of claim. Money from lower risk pools is not mixed with higher risk pools. When a pool doesn't have enough incoming premiums to keep it above a certain rissk level, it is closed down...

 

[DisneyBamaFan]

Actually, I'm thinking about insurance the way it is.

Of course. That has nothing to do with the statement you replied to (nor did anything else you said in your reply, as far as I can tell).

It is not a lose/lose. Period. It is a win/win. Without it you wouldn't have anything to lose...

 

[Mikelly1221]

I understand, but I left Alabama so I could provide a better life for my family. Sometimes you have to make difficult choices. Choosing to stay could mean risking complete loss with no insurance if Florida has another bad hurricane season anytime soon, and no reasonable person would blame the insurance companies for leaving...

That's great for you, but it's not always possible for everyone just to uproot and move, especially with the current economic situation.

We'll see how this all shakes out-at least they announced it two years in advance. Maybe the other companies will see this as an opportunity to grab some former SF customers and spread the risk a little more.

 

[bicker]

Again, it's a lose/lose for the customer.

Insurance is, by definition, a lose/lose for the customer. By definition, insurance companies need to cover the insurance payouts, cover their operating costs, plus earn a profit in excess of what they could make investing their assets in other ways. Therefore, again by definition, how much customers get in insurance payouts must necessarily be less than how much they pay in premiums.

It is not a lose/lose. Period. It is a win/win. Without it you wouldn't have anything to lose...

That is not correct. You always have something to lose, no matter what you do. Live has risk. Period. The only question is whether you'll incur the loss associated with that risk or not. Without insurance, it's a win/lose for the customer: Either you "win" by not incurring the loss associated with the risk, or you "lose" by incurring the loss associated with the risk. With insurance, it's a lose/lose for the customer: You pay your premiums, i.e., "lose", whether you incur the loss associated with the risk or not.

 

[bicker]

We'll see how this all shakes out-at least they announced it two years in advance. Maybe the other companies will see this as an opportunity to grab some former SF customers and spread the risk a little more.

Neither State Farm nor Allstate have elected to return to Massachusetts for auto insurance. When they closed shop, here, no one stepped in. We simply had fewer choices.

To be fair, they pulled out, and presumably others refused to enter the market here, because of over-regulation. How is Florida's homeowners insurance regulation situation? Is is relatively anti-business? Do they force a certain amount of coverage for flooding or other types of hurricane damage, without allowing underwriters to establish premiums based on their estimates of how much providing such coverage would cost (versus requiring that premiums be affordable)? If they engage in any anti-insurer regulation like that, I wouldn't expect anything other than fewer choices for customers.

 

[Mikelly1221]

Neither State Farm nor Allstate have elected to return to Massachusetts for auto insurance. When they closed shop, here, no one stepped in. We simply had fewer choices.

To be fair, they pulled out, and presumably others refused to enter the market here, because of over-regulation. How is Florida's homeowners insurance regulation situation? Is is relatively anti-business? Do they force a certain amount of coverage for flooding or other types of hurricane damage, without allowing underwriters to establish premiums based on their estimates of how much providing such coverage would cost (versus requiring that premiums be affordable)? If they engage in any anti-insurer regulation like that, I wouldn't expect anything other than fewer choices for customers.

Someone else more knowledgeable than me will have to give you the nuts and bolts, but I know that there is almost a constant tug-of-war between the insurance companies and Tallahassee. Companies want/need to raise rates to stay profitable and the government tries to keep them down. Here are some links that might help explain things. I know they are a bit dated.

http://www.fldfs.com/PressOffice/2006Legislative/HurricaneInsProposalBullets.pdf

http://southflorida.bizjournals.com/southflorida/stories/2005/05/30/daily24.html

Interesting about auto insurance in Mass. Why did they leave?

 

[bicker]

In the end, money -- of course, right? The insurance commission was imposing too many regulations, forcing insurers to provide insurance for high-risk drivers at a price lower than the risk associated with providing that insurance warranted.

I just read those rules, in the second link you provided. Holy cow, no wonder why they're refusing to offer policies in Florida going forward. Again, selling insurance isn't gambling. If the state makes the rules such that the insurer cannot assure the underwriters of more profit than they could get by investing their money in some other way, then that state doesn't deserve the insurance company's offerings.

 

[Mikelly1221]

In the end, money -- of course, right? The insurance commission was imposing too many regulations, forcing insurers to provide insurance for high-risk drivers at a price lower than the risk associated with providing that insurance warranted.

That sounds familiar. Replace the word "auto" with "homeowners" and it sounds like the same problem we have. Insurance-it's a love/hate relationship!