State Farm Passing The Buck…Literally

On October 19th, 2011, a story regarding State Farm’s ongoing practice of dumping its homeowner’s policies over to state-backed Citizens Property Insurance.

News?  Hardly.  Certainly not to the hundreds of State Farm homeowners policyholders that are receiving renewal rates as high as triple that of last year’s rate.

A 2008 state law allows companies like State Farm to continue giving multiple-policy discounts to customers, even if the company only provides automobile insurance coverage and drops their homeowners’ coverage. The catch? The homeowners’ policy has to go to Citizens, not another private insurer.

While that law may help improve State Farm’s financial picture, critics say it’s a bad deal for Floridians, who absorb costs for Citizens, Florida’s insurer of last resort.

Allowing State Farm to push policyholders to Citizens shifts the costs — and the liability for major-storm coverage — to the state’s property insurance policyholders who pay fees to offset the insurer’s deficits.

But yet , under the same law, State Farm is allowed to keep the bundling discount it’s offered to multi-policy customers by selling them their own auto coverage, but Citizens Home Insurance.  Interesting though – the State of Florida doesn’t extend that provision to any other insurance carrier.

Furthermore, the law requires State Farm to dump their homeowners policies with only Citizens.   Independent insurance agents are able to extend options outside of Citizens. So why is the State of Florida allowing State Farm to dupe policyholders into thinking that Citizens is their only option for homeowner’s coverage?

What’s worse is State Farm agents are not advising their customers of the 45% special assessment Citizens can levy against all policyholders in the event of a major storm event. Neither State Farm, nor the State of Florida for that matter, is informing residents that although they’re paying their annual homeowner’s premium, which could amount to $3,000 a year, that  if a major storm makes landfall anywhere in the state,  they can get hit with a 45% assessment…even if they’re area isn’t affected!   That’s an additional $1,350 on top of that $3,000 annual premium.

Is that measly 4% to 6% discount State Farm gives their auto insurance customers for having them write your Citizens policy worth a a 45% assessment?  I’m guessing most won’t think so.

It’s time homeowners know the truth and make an informed decision.