Farmers Insurance will end coverage in Florida, a move that will affect about 100,000 existing policies and represents the latest retreat by insurance companies reluctant to cover Americans living in disaster-prone areas.
In Florida, Farmers stopped offering new auto, home and umbrella policies on Tuesday and said coverage for existing policyholders would not be renewed upon expiration. Though the state has been mired in a property insurance crisis that companies and Florida politicians blame on costly legal disputes and litigation, Farmers did not cite those issues in its decision. Instead, it blamed the growing costs of natural disasters and construction.
“This business decision was necessary to effectively manage risk exposure,” Farmers Insurance spokesperson Trevor Chapman said in a statement. Florida officials signaled displeasure with the company’s decision; the state insurance commissioner said in a letter to the company Tuesday that the step was taken hastily and communicated poorly.
As the world confronts more extreme weather intensified by climate change, home insurance has become more complicated and costly for many Americans.
In California, State Farm, Allstate and AIG have stopped taking on new policies. State Farm became the latest in May, citing “rapidly growing catastrophe exposure” and increases in construction costs. Farmers said this month it would limit new homeowners insurance policies in California, citing “record-breaking inflation, severe weather events, and reconstruction costs continuing to climb.”
In hurricane-prone Louisiana, 12 insurers have left the market in the past three years, and 11 have been declared insolvent, while 50 carriers have stopped writing new policies in certain parishes, said Mark Friedlander, spokesperson for the Insurance Information Institute.
In Florida, Farmers’ move is another blow to the state’s already struggling insurance market, which lawmakers have tried to bolster. It also comes as Florida is bracing for the coming hurricane season, with record-warm Atlantic waters expected to bring above-average activity.
Floridians pay an average of $6,000 annually for home insurance — compared with a national average of $1,700, Friedlander said. The average in Florida increased 42 percent over the past year and 100 percent over the past three years, he said.
Farmers notified the state of its move Monday. The Florida Office of Insurance Regulation is reviewing the notice, a spokesperson said, which was not made public because it was designated a trade secret.
Florida Insurance Commissioner Michael Yaworsky said in a letter to the company Tuesday that the state had concerns about how Farmers communicated the move and was “troubled by how this decision may have cascading impacts to policyholders.”
The move affects about 30 percent of the company’s policyholders in Florida. Existing policies will remain active until they expire, at which time they will not be renewed. Policies offered by Farmers under the brands Bristol West and Foremost are not affected and will continue.
Yaworsky said in the letter that Farmers representatives, on a phone call, “committed to facilitating” affected policyholders’ switches to other insurers. Chapman, the company spokesperson, said Farmers will notify current customers about when their coverage will end and advise them “of options for replacement coverage.”
Florida has been grappling with a property insurance crisis, as homeowners have had hurricane-related claims closed with payouts far below damage estimates and consumers have seen premium increases and lost coverage, the Palm Beach Post has reported. Last year, Bankers Insurance and Lexington Insurance both withdrew from the state; over the past year and a half, 15 insurers have stopped writing new policies and seven have been declared insolvent, Friedlander said.
In 2022, residents filed 678,986 personal and commercial claims, almost 42 percent of which were hurricane-related, according to the state’s latest insurance market stability report, which was published earlier this month.
In the first half of 2023, 18 of Florida’s 110 insurers were put on a watch list and two were in bad enough shape to need “enhanced monitoring,” according to the report. In total, 18 companies are receiving extra supervision.
Lawmakers have passed measures aimed at strengthening the market, but turning around a market “in such turmoil” takes time, Friedlander said.
Brianna Sacks and Anumita Kaur contributed to this report.