TALLAHASSEE, Fla. (AP) — Farmers Insurance became the latest property insurance company to pull out of Florida on Tuesday despite repeated efforts by Republican Gov. Ron DeSantis and the Legislature have made to try to calm the volatile market that is making homeownership less affordable.
Farmers informed the state that it's discontinuing new coverage of auto, home and umbrella policies. The company said in a statement that the decision affects policies issued through its "exclusive agency distribution channel," which is an estimated 100,000 policies.
Farmers said there will be no effect on 70% of current policies in Florida.
"This business decision was necessary to effectively manage risk exposure," company officials said in a statement.
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Critics of DeSantis, who is seeking the Republican nomination for president, say he has focused too much effort on divisive cultural issues and not enough on making housing and insurance more affordable. The Legislature has grappled with the issue each of the last two years, including a special session in December.
Most of the focus has been on shielding insurance companies from lawsuits and setting aside money for re-insurance to help protect insurers. The Office of Insurance Regulation sent a letter to Farmers responding to the notice that it doesn't plan to write new policies.
"Florida's leaders have stepped up to the plate by delivering historic reforms to Florida's property insurance market to ensure competitiveness and increase consumer choice," Insurance Commissioner Michael Yaworsky wrote to the company.
Yaworsky noted, though, that state's recent law changes weren't a factor in Farmer's decision.
"We are disappointed by the hastiness in this decision and troubled by how this decision may have cascading impacts to policyholders," he wrote.
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Farmers said in a statement that the decision was based on risk exposure in the hurricane-prone state and that notifications will be sent out to affected policyholders along with advice on replacing coverage. The company's website on Tuesday, responded to quote requests for several Florida zip codes by saying coverage wasn't available and suggesting links to other companies and resources.
At the end of 2022, average annual property insurance premiums had risen to more than $4,200 in Florida, which is triple the national average. About 12% of homeowners in the state didn't have property insurance, compared with the national average of 5%, according to the Insurance Information Institute, a research organization funded by the insurance industry. At least six insurers went insolvent in Florida last year.
Florida has struggled to keep the insurance market healthy since 1992, when Hurricane Andrew flattened Homestead, wiped out some insurance carriers and left many remaining companies fearful to write or renew policies in Florida. Risks for carriers have also been growing as climate change increases the strength of hurricanes and the intensity of rainstorms.
ORI released the following statement:
Yesterday, OIR received a market reduction notice from Farmers Insurance Group. OIR is reviewing the notice in accordance with applicable Florida Statutes. However, the notice has been marked as trade secret.
For your background, there are statutory requirements in place to protect consumers regarding nonrenewal notices. S. 624.430, F.S., requires an insurer to give 90 days’ notice in writing to OIR if it desires to discontinue the writing of any one or multiple lines of insurance in Florida and the reasons for such action. No nonrenewal notice can be sent out by the company until the 90 days has lapsed and then the required notice to policyholders will apply. Additionally, any insurer planning to nonrenew more than 10,000 residential property insurance policies in the state within a 12-month period is required to give 90 days’ notice, for informational purposes, in writing to OIR, in accordance with s. 624.4305, F.S.
If a consumer receives a nonrenewal notice from Farmers Insurance Group, they are encouraged to contact their agent immediately to seek alternate coverage. Additionally, insurers are required to comply with Florida Law regarding the permissible reasons for cancellation or nonrenewal of homeowners policies. This includes a required 120 days’ notice before the effective date of the nonrenewal, to give consumers adequate time to find alternate coverage. Specific timelines for notice requirements of varied policy coverages can be found in s. 627.4133, F.S.
It's also important to note, Florida has enacted historic and unprecedented reforms designed to promote market stability, but the impact of these reforms will take time. For your reference, recently passed legislation to address these challenges includes Senate Bill 76 (2021) [flsenate.gov], Senate Bill 2-A (2022) [flsenate.gov], Senate Bill 2-D (2022) [flsenate.gov], House Bill 837 (2023 [flsenate.gov]) and Senate Bill 7052 (2023) [flsenate.gov].
Most of the primary cost drivers in the Florida property insurance market, including catastrophic claims, adverse loss reserve development, and higher reinsurance costs, are notably exacerbated by excessive and costly litigation. These historic and unprecedented legislative reforms in recent years addressed these cost drivers to bolster Florida’s property insurance market and create stability and competition by reducing costly litigation. Through these legislative changes, we are ensuring the future availability of affordable and reliable insurance products for consumers.
OIR is committed to doing everything possible to ensure consumers have coverage available, especially during hurricane season. OIR will continue to use the fullest extent of our regulatory authority and work closely with Farmers Insurance Group to ensure consumer protection as we review the market reduction notice.