WEDNESDAY, AUGUST 27, 2014
One of the state's largest property insurance companies is fighting to keep policy information secret that has long been available to Florida consumers.
State Farm filed a civil injunction in May asking a judge to prohibit insurance regulators from releasing data to the public on the number of new policies the company is writing in each Florida county, and other commonly reported statistics.
Consumer advocates worry that shielding the information would make it harder for insurance customers to make informed decisions, and some also have questioned whether the legal case is an attempt to hide the details of an expansion plan that so far has proven underwhelming.
State Farm says the data contains trade secrets that would hurt the company's competitive advantage if disclosed.
The dispute is unusual. Basic property insurer policy count data is gathered by the state every quarter and has been made available to the public for years. State Farm has been reporting the figures since at least 2004.
The legal battle comes after State Farm officials announced in February that they plan to write new policies in Florida for the first time in five years, a potentially significant reversal for an insurer that retreated from the market in dramatic fashion after the devastating 2004 and 2005 hurricane seasons.
Once Florida's top home insurance company, State Farm shed 60 percent of its business in Florida over the last decade. That retreat was even more pronounced along the coasts, with the company reducing its policy count by 85 percent in Sarasota and Manatee counties, from 40,114 down to 5,919.
The cancellations left homeowners scrambling to obtain coverage from a variety of small, thinly capitalized insurers — often at higher prices — and resulted in a major expansion of Florida's government-run insurer of last resort.
Florida has the most expensive home insurance costs in the nation despite eight years without a hurricane hitting the state, and many experts believe the market is still highly unstable. If State Farm started taking on large numbers of new customers again it could provide a big boost to the market.
So far that is not happening, though.
While the company is fighting in court to withhold most policy data from the public, it has released limited information to the Herald-Tribune and other media outlets that shows a net decrease in policies during the first half of the year. The insurer's total policy count dipped from 389,109 in late 2013 to 381,284 on June 30.
Those figures have some industry observers questioning if State Farm's expansion announcement was little more than a public relations ploy.
Jay Neal, president of the Florida Association for Insurance Reform, described State Farm's plan to write new business as a token effort to appease elected officials and improve the company's standing in the state capital.
Neal said that as State Farm has shrunk, the company's influence has waned. Maintaining political clout is important, especially with state officials periodically threatening to prohibit companies that stop writing homeowners' policies in Florida from writing auto coverage in the state. State Farm has a lucrative auto insurance business in Florida.
"I think it was completely designed toward the Legislature," Neal said, arguing that to get preferred legislation the company is "constantly holding up the cheese that they're going to come back and start writing policies again."
Going to court to shield the policy count data is about "trying to hide the football" and keep the public from seeing that State Farm's presence in most communities continues to shrink, Neal said.
State Farm spokesman Kip Diggs said the company has long opposed the disclosure of county-by-county policy data. Shielding the data is a matter of protecting the company's bottom line, he said.
In a court filing, State Farm attorneys argued that giving policy count information on the local level "would identify those areas of the state of Florida that State Farm identifies as being desirable areas to market and write new business and provide competitors with valuable detail about State Farm's customers in those areas."
State Farm also challenged Florida's disclosure requirement in 2007 but the company was "writing very limited new business" at the time and, after experiencing a legal setback, decided to drop the case, court documents note.
The fact that State Farm is continuing to shrink despite starting to write new business again should not be surprising, Diggs said.
"While it is true we have started to write on a limited basis it's going to take time to reflect that," he said. "This is a change in what we've been doing and so, as you might imagine, there are people who aren't aware of what we're doing and don't know so they're not coming to us yet."
Only time will tell whether State Farm is truly committed to expanding in Florida, said Michael Lechtner, president of the Home Insurance Buyers Guide.
"If the new business increase offsets the cancellations to me that will be the ultimate proof to the consumer that this is not just window dressing but a sincere expansion," he said.
Lechtner keeps a close tab on which companies are actively offering homeowner's coverage in each Florida community. So far, only a handful of his customers have received quotes from State Farm in recent months. They are people with new homes, or those living far from the coast.
Florida consumers have too few choices when it comes to homeowners' insurance, Lechtner said. He believes the return of large "legacy carriers" such as State Farm would be great for the market.
"You might see further shrinkage and blended in there is some very selective new business, but I'm all for them coming back on whatever level they want," Lechtner said of State Farm. "We're just not going to get by" with the smaller companies that dominate Florida's property insurance market.
The same sentiments have been echoed by lawmakers for years. Former Gov. Jeb Bush even talked about his desire to see State Farm and other large carriers expand in Florida again during a recent visit to Punta Gorda for the 10th anniversary of Hurricane Charley.
But Lechtner does not believe the state should sacrifice transparency. Reporting county-level policy data helps consumers know which companies are expanding in a given area, and which have a history of canceling policies. Seeing the size of companies also gives people some sense of their stability.
Consumers and industry analysts also can look at the county-level policy data and tell if a company is writing too many policies in risky areas such as hurricane-prone South Florida or the sinkhole-heavy region north or Tampa Bay. Such concentration of risk has contributed to the 12 property insurer failures in Florida over the last decade. Insurance customers throughout Florida paid for those insolvencies in the form of special assessments.
"There's not enough transparency" as it is, Lechtner said.
Make sure you're protected with the right policy. Call Prestige Insurance Group, Inc. at (305) 969-8776 for more information on Miami auto insurance.
(Article courtesy: The Herald Tribune)
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