Florida Chief Financial Officer Alex Sink is urging State Farm Florida to “immediately” let its agents do business with other insurance companies for their more than one million policyholders now that State Farm is withdrawing from the state.
But State Farm has rejected the idea.
Sink called State Farm Florida’s contracts with its agents “inappropriate” for limiting them to placing business only with State Farm but stopped short of calling the arrangement illegal.
State Farm announced on Jan. 27 that it is beginning the two-year process of withdrawing from the state’s property insurance market. The company said it would go insolvent if it did not act now to drop out of the market. It criticized state regulators for keeping it from charging prices it believes it needs in order to stay in the state’s risky property environment.
State Farm Florida agents are not employees; they are independent contractors. But under the terms of their contracts they can only sell policies for State Farm or place them in state-backed Citizens Property Insurance. Unlike State Farm agents, independent agents have contracts with multiple private carriers.
In a letter to State Farm Florida President Jim Thompson, Sink said the contractual limitation forces the company’s 826 agents either to preserve their relationship with their customers by placing them in the state-backed Citizens Property Insurance or sever their customer relationships so customers can find coverage with another private market insurer.
“Given State Farm Florida’s projected insolvency within the next two years and intended wihdrawal, I find it inappropriate to limit your agents’ ability to help your customers find the best possible property insurance coverage,” Sink wrote.
“Your loyal insurance consumers deserve the opportunity to keep their relationship with their State Farm agent and be placed with the property insurance company that best meets their insurance needs,” she stated.
Chris Neal, public affairs manager for State Farm Florida, rejected the CFO’s proposal. “We’re simply not even considering brokerage issues now,” he told Insurance Journal.
He said State Farm agents have the opportunity to exclusively represent the company for auto insurance and other products in addition to homeowners insurance. State Farm is not withdrawing from the Florida auto insurance market where it insures about 2.8 million customers.
Either State Farm or its agents could end their contracts at any time but Neal said that is not something State Farm is going to do.
Was this article valuable?
Here are more articles you may enjoy.
Grand Jury Indicts ‘Hole in Won’ Owner on Prize Insurance Fraud Charges 
Progressive Records Five-Fold Increase in Q1 Net Income 
US Dog-Related Injury Claims Hit $1.12 Billion in 2023: Triple-I, State Farm Report 
Carnival Puts Miami Headquarters Up for Sale as Florida Real Estate Soars 
