Rating agency downgrades State Farm in Florida

State Farm Florida's financial strength rating has been downgraded.
The A.M. Best Co. said Thursday that it reduced its rating on State Farm based on the company's significant deterioration in earnings in Florida and the expectation that the downturn will continue.
State Farm's outlook in Florida was revised from stable to negative by the New Jersey-based rating agency.
State Farm spokesman Justin Glover called the newest rating unfortunate but understandable considering the challenges facing the state's property insurance marketplace.
"From our standpoint, our claims, losses and expenses continue to outpace our premiums and we have not received any regulatory or rate relief," Glover said.
State Farm Florida filed a plan in January to stop writing property insurance in Florida where it has more than 1 million property insurance policyholders.
Although its A.M. Best rating was downgraded, State Farm Florida remains in compliance with minimum surplus requirements of Florida law based on its most recent filings with the state's Office of Insurance Regulation, OIR spokesman Ed Domansky said Thursday.
"It is important to point out that since 1992, State Farm has received nearly 530 percent in approved rate increases," Domansky said. "Most recently, an increase of more than 52 percent in late 2006."
State Farm Florida was established in 1998 as a subsidiary of State Farm Mutual Automobile Insurance Company to underwrite the state's high-risk property market.
And while it plans to leave the property insurance market, State Farm will continue to sell auto, healthy and other lines of insurance in Florida, where the Bloomington, Ill.-based company employs more than 5,000 people in Florida, including 800 agents.

Is Florida deregulating property insurance rates?

ST. PETERSBURG, FL -- One would think having a water-front view from your backyard would be priceless. But, Gardner Bayless says it comes with a cost. The St. Petersburg homeowner says the only option he has to insure water-front property is state-run Citizens Insurance."I like the idea of more companies here, the challenge is reasonable rates, rates that are affordable," Bayless says.But some lawmakers say competitive, reasonable, rates can be achieved through the so-called "Consumer's Choice" bill. The bill would allow the market to dictate insurance rates, not the state.Proponents of the bill say it will lure more insurance companies into the state and keep big name companies like State Farm from leaving.But, consumer advocates are wary."It seems to be giving them a way to stay in the state and let them raise their rates as high as they want," says Bill Newton with the Florida Consumer Action Network.Earlier this year, state regulators denied State Farm’s request to raise their rates by an average of 60%. So the good neighbor is dropping their Florida customers.Newton calls the bill the "State Farm bailout" and he says it would be bad news for homeowners across the board. "Its going to mean higher rates for almost everyone."The bill is now off to Governor Charlie Crist's desk where he can either sign it into law or veto it.Back in January, Consumer Reporter Kerry Kavanaugh asked Governor Crist if he was willing to work with State Farm to keep them around. "I don't want to work with them to give them a rate increase, hell no," Crist said in January.When asked about the bill earlier this week the governor said; "To have that industry unregulated in essence is not something that is appealing to me nor is it fair to the customer. I have not made a final decision on the bill and will continue to evaluate it as it reaches my desk."Homeowners like Gardner Bayless aren't so concerned with the politics of this issue. They just want an affordable way to insure their home."Charging what they want isn't going to get a reasonable price, I'm not sure what the solution is," Bayless says.