Nice to see some support for the tough decision State Farm made in Florida recently...
http://blog.winterhavenfl.com/
Posted by Bob Gernert on January 30, 2009 at 11:39 am
(This post is longer than we normally write … but the situation is complex and has great potential to impact all Polk County businesses. If you want a healthy local economy in the future - it’s well worth the read and you’ll find email links at the end to do your part. We have never suggested you forward a blog post but we encourage you to do just that — send this link to every Florida taxpayer you know. - BG)
State Farm’s decision to withdraw from Florida’s property insurance market has rocked the state … but perhaps more troubling is Governor Crist’s “good riddance” attitude toward a company that, under currently approved rates, would become insolvent as early as 2011. One doesn’t have to look far to see the results of companies less prudent – the line for bail out money is ever expanding.
No community in Florida – perhaps no county stands to lose more if State Farm is forced to exit all lines of business (as Crist has suggested) than Winter Haven and Polk. Those who remember when State Farm first located its regional office to Highway 17 North in 1962 can testify to the incredible economic impact it brought to our area. Within 10 years of the office opening, Winter Haven saw each of it’s three banks expand their locations, Southeast Plaza opened and Winter Haven Hospital had built its multi-storied tower. Southeast Winter Haven exploded with growth as John Wood and other developers built to accommodate the workforce.
But it didn’t stop there. State Farm is more than “a good neighbor.” They are a model corporate citizen. It would be difficult to find a local cause, project or service organization that has not benefited from the involvement of State Farm and its employees.
Contrast the current Tallahassee attitude to the fact that not long ago Governor Jeb Bush visited the Cypress Gardens Boulevard complex and told employees assembled in the massive foyer that State Farm was the premier “student mentoring organization” within the state. The company makes a major commitment to education and encourages their employees to mentor students while they are “on the clock.”
Cooler heads must prevail to address the current situation. Here is what the Florida Chamber had to say about State Farm’s property insurance decision.
“State Farm Florida’s announcement is extremely disappointing but understandable. This should serve as a wake-up call that conditions in Florida’s property insurance market are unsustainable and we are financially unprepared for a major hurricane. It is critical that Florida look at making improvements to restore the health of our property insurance market and reduce our overreliance on state-run insurance companies to provide affordable hurricane insurance by charging less than actuarially sound rates. We need a healthy property insurance market where the risk of hurricanes is not on the taxpayers’ backs but on private insurance companies.
For nearly 80 years, State Farm has been one of the state’s most significant corporate citizens, providing Floridians with strong and secure products to protect their property. State Farm has consistently been a significant contributor to Florida’s economy, providing more than 10,000 jobs throughout the state as well as contributing millions of dollars annually that support our state’s economy through investment in our communities and essential state infrastructure.
This decision by State Farm is a clear indication of the risk inherent with Florida’s unstable property insurance market and our over reliance on post-hurricane assessments. Hopefully we won’t have to see them leave the state, but we recognize the significant risk private insurers must be willing to accept to write hurricane insurance in Florida.”
It is indeed ironic that faced with falling tax revenues the Legislature finds no other alternative to balance the budget than cutting services. Yet State Farm – a private company – is expected to insure tremendous risk (think 2004 hurricane season) with declining reserves. The fact is – if you are paying out more than you are taking in — you just can’t make it up in volume.
Furthermore it is really a personal matter for you and every other citizen of Florida. Here’s what Orlando Sentinel columnist Mike Thomas wrote January 29.
“State Farm is bailing out of Florida, and Charlie Crist says good riddance. I’m not sure the thousands of policyholders about to be thrown into the maw of Charlie’s socialized insurance market will agree. And the consequences extend well beyond that.
State Farm is about to dump 1.2 million policies, which means a massive expansion of the state-run Citizens Property Insurance. That will put taxpayers at even greater risk when the next big hurricane hits because Citizens is woefully underfunded.
It also threatens the credit rating of not only the state but also the dozens of small private insurance companies that have set up shop in the past few years. Those insurers, many of them untested in a catastrophic event, depend on the state’s ability to borrow money to help them pay their claims after a major storm. That borrowing capacity is dwindling as the gap between the state’s hurricane obligations and its ability to meet them grows.
A major rating agency for small insurers, Demotech, has notified them that they have until May 15 to demonstrate an ability to pay claims if the Florida Hurricane Catastrophe Fund goes bust, which would be a given after a major storm.
The fund is obligated to pay out $29 billion in claims but only has about $10 billion in the bank — most of that borrowed money, by the way.
You need insurance to buy a house. A wholesale rating downgrade of Florida’s insurance carriers could roil a real-estate market just showing signs of life.
This is serious stuff. And it could not be happening at a worse time … Crist has Florida on a path toward junk-bond status. It would have been better to simply give State Farm its rate increase. As a State Farm customer, I would have liked the option of accepting the increase or going with a different insurer. I don’t need Crist and company making that decision for me. This also would have created a much more orderly retreat of State Farm from the Florida market. Alas, it did not fit in the script Charlie has written for his moral crusade against the insurance industry. (You can read Mr. Thomas’s complete column here.)
And we would add, if Citizens runs out of money to pay claims … who will cover the shortfall?
All Florida residents should now look in the nearest mirror.
This IS serious stuff. It is time we become as neighborly to State Farm as they and their 10,000 Florida employees have been to us. Send a positive note of encouragement to Governor Crist and our Legislative delegation today. This situation demands compromise.
We suggest you write the email, copy the text and send to the following ….
1 comment:
Well said Joe.
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