In early June, Farmers Insurance Group introduced it could stop issuing new householders insurance policies in Florida for the foreseeable future. A Farmer’s spokesperson defined the choice, stating, “[w]ith catastrophe costs at historically high levels and reconstruction costs continuing to climb, we implemented a pause on writing new homeowners policies to more effectively manage our risk exposure.”1 The announcement comes on the heels of an inflow of insurance coverage claims following Hurricane Ian’s widespread devastation to the state.
While this weblog has lined the quite intensive points policyholder advocates have had with Farmers (right here, right here, right here, right here, right here, and right here, to call just a few), the transfer could have some regarding implications. Economics 101 tells us that, by limiting the choices obtainable to policyholders, competitors within the Florida insurance coverage market decreases, which can drive already growing prices of protection increased. With fewer carriers to select from, property homeowners could face challenges in securing protection at inexpensive charges or discovering insurance policies that meet their particular wants. Further, whereas present policyholders could not instantly be affected by Farmers’ choice, this growth could result in elevated scrutiny from insurers when it comes time for coverage renewals. As insurance coverage firms reassess their threat publicity, their underwriting practices could develop into extra stringent. This might lead to policyholders dealing with stricter necessities, increased premiums, or non-renewal of their present insurance policies.
Of course, there’s additionally the potential that Farmers policyholders could expertise a rise in declare denials. With the corporate aiming to handle its threat publicity and minimize losses, it’s attainable its claims-handling course of will get a facelift – does McKinsey and Co. ring a bell? – aimed toward saving cash. Unfortunately, as we’ve seen earlier than, when insurance coverage firms want to save, they have a tendency to take action on the expense of the policyholder.
On the opposite hand, it’s not all dangerous. Farmers’ choice might be seen because the accountable method to keep away from overextending their monetary capabilities, thereby defending the policyholders they have already got. Additionally, Farmers’ withdrawal from the market opens up alternatives for different insurance coverage firms to step into the gaps Farmers is leaving. This creates house for brand spanking new and present insurers who’re higher geared up to deal with the challenges of the area’s distinctive dangers. The shift available in the market panorama leaves room for insurers who don’t place earnings over policyholders (and a few do exist!) to do the precise factor.
Perhaps most significantly, Farmers simply stated what each insurance coverage firm is considering: the growing frequency and severity of catastrophic occasions paired with the regular improve of fabric and labor prices is slicing into the business’s earnings. The incentive for insurance coverage firms to delay and deny claims has by no means been increased. Policyholders in Florida and across the nation ought to pay attention to this potential threat and be ready to navigate the claims course of diligently. And, as at all times, ought to an unjust delay or denial occur to you or somebody you’re representing, the attorneys at Merlin Law Group are at all times right here to assist.
1 Kane, Libby, and Sarah Silbert. Where to Get New Home Insurance in Florida Now That Farmers Doesn’t Offer It. 14 June 2023,. Available on-line at www.businessinsider.com/personal-finance/farmers-homeowners-insurance-florida-alternatives-2023-6.