Farmers Insurance Will No Longer Offer Home Insurance in Florida

Last week, Farmers Insurance announced it would no longer be selling home, auto, and umbrella policies in Florida, becoming the latest insurance company to pull out of the Florida market. Progressive said they needed to “effectively manage risk exposure.” 

“We have advised the Florida Office of Insurance Regulation (OIR) of our decision to discontinue offering Farmers-branded auto, home, and umbrella policies in the state. This business decision was necessary to effectively manage risk exposure. Farmers offers insurance through several different brands, and this decision applies only to policies issued through our exclusive agency distribution channel,” Farmers Insurance spokesman Trevor Chapman said in a recent Washington Examiner article.

“There is no impact to 70 percent of policies currently in force for customers in the state, including Bristol West, Foremost Signature, Farmers GroupSelect, Foremost Choice, and Foremost-branded policies. Such policies will continue to be available to serve the insurance needs of Floridians. Affected customers will receive notifications detailing when their coverage will end and will be advised of options for replacement coverage,” said Chapman in the Washington Examiner article.

Progressive is just one of several insurance companies that have either pulled out of the Florida market or gone under. According to Mark Friedlander, the director of corporate communications for the Insurance Information Institute, the dramatically rising costs of premiums for homeowners insurance in Florida is not due to the threat of hurricanes.

“Yes, Florida is prone to hurricanes more than any other state, understandably a high-risk state, but no other state faces man-made factors like Florida does. Yes, there are fraud issues in other states, there are some legal system issues in other states, nothing along the lines of Florida,” said Friedlander in the Washington Examiner article.

The main driver of higher premiums in the Sunshine State is excessive litigation of insurance claims which are helped along by the laws in Florida that regulate homeowners insurance. Friedlander pointed out that excessive litigation in Florida has resulted in seven regional insurers going insolvent in the past year and a half.

“The property insurance market has been extremely unstable, even today, we have 18 Florida residential insurers — smaller companies — that are on a watchlist of the Florida insurance regulator because of concerns over their financial health,” Friedlander said in the Washington Examiner article.

“So, this has been an ongoing crisis and as a result, in Florida, consumers are paying the highest average premium in the U.S., they are paying $6,000 on average, 42% higher than last year, 100% cumulatively higher over the last three years and compared to the U.S., the U.S. average is running at about $1,700,” Friedlander continued in the Washington Examiner article. 

As more and more insurers have left the Florida market, another problem has emerged. The insurer of last resort in the state, Citizens Property is now the largest insurer in Florida due to the private insurance market shrinking as insurers leave the state. Citizens Property is currently 100% larger than any other insurer in the state which is “clearly a sign of distress in a private insurers market,” according to Friedlander in the Washington Examiner article.

While the state legislature has made some effort in resolving the issues, experts say the Florida insurance market will take years to stabilize. 

“The good news is the state legislature has taken some very strong actions in the last couple of sessions, including a special session back in December 2022, where they initiated reforms signed into law by Gov. Ron DeSantis (R-FL). And we’re very supportive of those new regulations, which will eliminate two key factors driving the crisis: one-way attorney fees and assignment of benefits, where a policy owner signs over their claim to a third party, which is a big driver of fraud,” Friedlander said in the Washington Examiner article. 

“Unfortunately, the Florida insurance market has been in such turmoil for so long that it’s gonna take a long time to dig out of the hole that we are in because it is just so messy,” Friedlander predicted in the article. 

While legislators have passed a variety of legislation, it will most likely be years before it results in lower premiums for homeowners. Legislation in 2022, bill SB 2-A, eliminated one-way attorney fees for property insurance claims. 

Despite the law eliminating one-way attorney fees, Friedlander said in the Washington Examiner article that “the backlog of cases that were filed prior to the legislation (along with a surge of lawsuits filed just before the legislation took effect) means the problem will not go away for a while.”

There is no timeline for when the insurance market may stabilize. “When the first set of reforms were passed in December, in the special session, some of the legislators who led those efforts were saying ‘we’re hoping within 18 months we’ll see signs of stability.’ I’m not sure we can say that anymore,” Friedlander said in the Washington Examiner article. “We’re not predicting a time frame because there’s just so much interference and so many outstanding issues that it’s just really hard to predict. And Florida consumers are suffering because prices are escalating.”

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