The tiff between State Farm Florida and the Office of Insurance Regulation that has culminated in the insurer’s withdrawal from the state’s property market is disturbing.
It’s not disturbing because an insurance company is leaving — that’s happened before, often for competitive or economic reasons having nothing to do with regulation, and other carriers seem to take their place.
It’s not disturbing because consumers will be hurt — this is unlikely to happen. They may be inconvenienced but they’ll get replacement coverage and in some cases, a better deal. The state has plenty of consumer protections in place, too.
Rather the tiff is disturbing because it represents a failure of responsible parties to do their jobs. It’s so easy to get caught up in all the history and drama between these two adversaries and the other serious insurance challenges in this state but, very simply, the bottom line in this controversy is money. State Farm needed more of it and state regulators told State Farm it couldn’t raise as much as it wanted. This isn’t the first or last disagreement over rates between insurers and regulators but let’s hope it’s the last time they can’t come to a compromise.
Nobody knows which side to blame or trust. At times, State Farm has seemed intent on not cooperating with state regulators, who in turn sometimes seemed more intent on getting even rather than getting it right for consumers.
According to a recent Insurance Journal survey of 133 Florida agents, they blame the state regulators (50.4 percent) more than State Farm (16.8 percent). Another 32.8 percent say they both are equally to blame.
As one agent put it: “We need to get personal agendas, politics and personal egos out of the insurance business in Florida.”
That goes for private agendas, politics and egos as well as public.
Another agent wrote: “Instead of having a contest on who has the most power, how about really trying to resolve the issues?”
Had State Farm Florida been granted the rate increase it sought, or settled for some of it, through the miracle of free enterprise many of its customers would have likely switched to other carriers with better prices. Now about 1.2 million policyholders are being denied a choice and will be forced into leaving State Farm. Who is better off now?
State Farm Florida agents aren’t better off. These 826 contract agents will lose almost 40 percent of their income when they lose their property market. This is thanks to the irresponsibility of their executives and state officials, not because of competition. Sure, this represents an opportunity for other carriers and agents but it’s hard not to feel sympathy for the State Farm Florida agents.
Florida faces bigger insurance problems than the pullout of a single carrier. Chief among them is an under-funded hurricane fund. To paraphrase Richard Nixon. neither OIR nor State Farm will have the other to “kick around” anymore. But if the same attitudes and egos that kept State Farm executives and OIR officials from settling on something as simple as a rate increase continue to poison the atmosphere, it’s difficult to see how they can resolve these bigger issues. Changing these attitudes could be as big a test for Florida’s insurance market as the next hurricane.
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