Yesterday, State Farm announced it will cease selling property insurance in Florida. This will require about 1.2 million State Farm insureds to find other coverage. It will also result in State Farm agents losing millions in premium revenue and income.
State Farm Agents are members of the local community. They obtain coverage areas where they are authorized to bear the State Farm banner and do business. They are instructed to market as a company that serves all the needs of its insureds, especially Homeowners coverage. In fact, the foundation of the company is Homeowners coverage, from back in the day when it insured the farm and home. State Farm agents cannot sell outside lines of insurance like independent agents. Thus, unlike say, a Nationwide agent, the State Farm agent cannot just locate outside insurance coveragefor its customer and be the agent for Homeowners Insurance purchased from the outside company.
The decision by State Farm to drop Homeowners coverage in the State stems from its latest failure to convince Florida Officials to allow it to raise rates by 47 percent. State Farm claims it cannot afford to do further Homeowners business in the State after legislation in Florida rolled back rates to 2006 levels. Insurance companies have been seeking rate increases and some have been reducing coverage ever since. The State Farm statewide cancellation is unprecedented. One just hopes the State Farm agents can weather the storm. The way they are being treated it is no wonder insurance agents like State Farm agents are known by the term "captive agents".
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