Grettings--

Want to let your readers know I work for State Farm--up at the Corporate office in Illinois. I'll not be your most popular blogger, I think.

I don't want to insult anyone's intelligence, I'm sure you are more than aware of the incredible challenges the insurance industry faces in your state. But I ask you to consider the business reality that comes with offering property insurance in Florida. It's really not a matter of State Farm Florida making profit, it's about having the money there for when the next big storm hits. Even with no major hurricane losses the last two seasons, State Farm Florida is still severely in the red.

There is a lot of misinformation out there. I encourage you to go to our website for the facts.

More ...

Jeff McCollum
State Farm Insurance

Thanks for your comments, Jeff. The more dialogue, disclosure, and discussion we have, the sooner we will get down to what's right and fair.

State Farm has been more than patient with the State of Florida despite suffering huge losses in Florida over the past five years. Insurance companies are not non-profit organizations. If they do not make money, they have no reason whatsoever to offer coverages to anyone. Insurance pricing is based on risk, actuarial factors, and actual past losses. The risks in Florida are absolutely huge and the present rates for homeowner policies are woefully insufficient to cover these risks.

Many companies have shut down writing homeowners coverage in the State of Florida for the simple reason that losses and future risks far outweigh any potential for profitable sound business operations. The State Farm operating company in Florida is a separate entity from the national State Farm corporation. It has sustained a net loss of $750 million from prior claims which it has been unable to pay back to its parent due to inadequate rates. For every $1 taken in on premiums by State Farm they are paying out $1.21 in claims. Would any sane person take $1 dollar and give out $1.21 to anyone? Obviously not.

The State of Flordia has been outright hostile to insurance companies who have lost a great deal of money (billions) in the State, and now will simply shut down. State Farm will be one of the first major companies to exit and many others will follow. No insurance company will stay and write coverages on residential property at a loss. The governor is an utter moron and he will get exactly what he deserves - no insurance at any price in the State if he and the legislators keep up their stupid attacks on insurance companies.

This entire issue can be simply solved by allowing insurance companies to charge whatever they deem appropriate and letting the market decide which companies get the business. In the absence of that common sense approach, look for many more companies to just pull the plug on Florida.

In my eyes, State Farm is doing exactly what they say they are about, being there for the customer. If your home is destroyed by a covered loss, it sounds like they want to pay the claim. If they are losing money and can't keep their reserves high enough to cover the claims, wouldn't the prudent thing to do be to refuse to write something they can't cover? Looking at this situation from a profit standpoint is one thing, but let's consider what would happen should they continue to write risks they can't cover. It just doesn't make sense. Personally, I'm considering moving out of the area since I'm not convinced there's too many companies that can make the promise to me they can cover me when I need it.

I notice no one has addressed the huge profits the industry makes and the CEO salaries, among the highest for industry. And what about taking money from those profitable years and saving it for the leaner times. Those in the industry- your information is good, but please tell us about how the insurance industry take premiums and invests them in the market as a real source of profit. What happens when the market goes down? Do the premiums go up? Thanks for any insider info here....

That's a good point, Jane, and exactly what I was about to post. Let's not let the insurance companies off because they are "crying poor" all of a sudden. Let's down to the actual numbers and find out where all the money went. I think that's the point of FL Insurance Commissioner Kevin McCarty's investigations into where the money goes. More ...

Someone explain to me how homeowners insurers are losing money after a couple of quiet storm seasons. Maybe someone can explain how reinsurance works better than I can? It sounds like a financial shell game to me. State Farm claims that "State Farm entity A" is going broke because it "can't charge enough" but it pays a fortune to "State Farm entity B" for reinsurance.

Frankly, if they have to charge more than everyone else to stay in business in Florida, either they spend too much on reinsurance, administration & marketing, or their actuaries are doing a poor job. If that's true, their departure should be a good thing.

All of these arguments are meaningless without a real financial analysis. We might as well be guessing how much gas is in the tank of a car by looking at it from the outside.

But let's not forget the old saying "Insurance companies are where banks go to borrow money." And let's not forget insurance company AIG, who cried poor so they could get tens of billions of taxpayer dollars to spend on facials, manicures, and rub downs at lavish resorts.

Unfortunately, home owners insurance is a business. They have come to the conclusion that there is better money to be made elsewhere.

Since California has many more disasters than Florida, how has State Farm managed to stay in that state. I haven't heard of you pulling out of California, South Carolina, Lousianna, Texes, or any states with a great amount of tornadoes. This is not the only state that has disasters. I don't recall you're paying out a lot in New Orleans. Is that because the goverment had to step in, thanks to the old tax payer.