Florida Insurance Network

Like a noxious neighbor, State Farm is expected to dump hundreds of thousands of Florida homeowners on the state’s bedeviled property-insurance market during the next two years.

State Farm insures a huge percentage of Florida homes. State of Florida worries that other companies won’t pick up enough slack, forcing state-run Citizens Property Insurance (the so-called insurer of last resort) to accept too much risk exposure.

The roof caves in, of course, if a major hurricane hits us. That’s when Florida might have to levy billions of dollars from millions of Floridians to cover claims that no one else can pay, including Citizens Insurance. Expert bean counters fear a bad hurricane season might even produce a fiscal disaster of historic magnitude.

Naturally, Florida wants to avoid this nightmare by spreading as much risk as possible to other insurers. That’s why state law requires insurance agents to write homeowners policies for at least one property insurance company before it permits them to write homeowners policies for Citizens.

The logic behind this is sound. We don’t want agents taking homeowners business straight to Citizens and loading it up with risk exposure. We want to help other insurers get a crack at the business in order to spread as much risk as possible.

The rule makes sense and it applies to all agents, except State Farm agents.

What?

Right. It’s a good rule but it doesn’t apply to agents who represent by far the single largest property insurance company in the state, which happens to be dropping all of its property insurance in Florida. Does that sound a little strange? Wildly contrary to good public policy? Bat-shit crazy? Wait … it gets even battier.

State Farm agents are so-called captive agents. State Farm won’t allow them to write homeowners insurance policies for other companies and, of course, it’s won’t provide any new property insurance of its own. That’s a bum deal for everyone.

So what does the sovereign State of Florida do in response? It not only made an exception to allow State Farm agents to take their clients property insurance directly to Citizens, it let them offer discounts on State Farm auto insurance as a reward for doing exactly what the law is intended to prevent.

We’ve heard of bending to the winds of adversity but do we have to bend all the way over?

Ask yourself this: Why would anyone shop for property insurance from other companies, using an agent they don’t know, when their friendly, familiar State Farm agent can obtain cheap insurance through Citizens and cut their car insurance as a reward?

Answer: they wouldn’t.

Maybe this works well for someone other than State Farm and its agents but we don’t know who.