In early June, Farmers Insurance coverage Group introduced it might stop issuing new owners insurance policies in Florida for the foreseeable future. A Farmer’s spokesperson defined the choice, stating, “[w]ith disaster prices at traditionally excessive ranges and reconstruction prices persevering with to climb, we carried out a pause on writing new owners insurance policies to extra successfully handle our threat publicity.”¹ The announcement comes on the heels of an inflow of insurance coverage claims following Hurricane Ian’s widespread devastation to the state.

Whereas this weblog has lined the fairly in depth points policyholder advocates have had with Farmers (right here, right here, right here, right here, right here, and right here, to call a couple of), the transfer could have some regarding implications. Economics 101 tells us that, by limiting the choices accessible to policyholders, competitors within the Florida insurance coverage market decreases, which can drive already growing prices of protection larger. With fewer carriers to select from, property house owners could face challenges in securing protection at inexpensive charges or discovering insurance policies that meet their particular wants. Additional, whereas present policyholders could not instantly be affected by Farmers’ resolution, this improvement could result in elevated scrutiny from insurers when it comes time for coverage renewals. As insurance coverage corporations reassess their threat publicity, their underwriting practices could turn into extra stringent. This might lead to policyholders going through stricter necessities, larger premiums, or non-renewal of their present insurance policies.

In fact, 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 reduce losses, it’s potential its claims-handling course of will get a facelift – does McKinsey and Co. ring a bell? – geared toward saving cash. Sadly, as we’ve seen earlier than, when insurance coverage corporations want to save, they have a tendency to take action on the expense of the policyholder.  

Alternatively, it’s not all dangerous. Farmers’ resolution will be seen because the accountable strategy to keep away from overextending their monetary capabilities, thereby defending the policyholders they have already got. Moreover, Farmers’ withdrawal from the market opens up alternatives for different insurance coverage corporations to step into the gaps Farmers is leaving. This creates area for brand spanking new and present insurers who’re higher outfitted 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 income over policyholders (and a few do exist!) to do the precise factor.

Maybe most significantly, Farmers simply stated what each insurance coverage firm is pondering: the growing frequency and severity of catastrophic occasions paired with the regular improve of fabric and labor prices is slicing into the trade’s income. The inducement for insurance coverage corporations to delay and deny claims has by no means been larger. 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 Regulation Group are at all times right here to assist.

¹ Kane, Libby, and Sarah Silbert. The place to Get New Residence Insurance coverage in Florida Now That Farmers Doesn’t Provide It. 14 June 2023,. Accessible on-line at www.businessinsider.com/personal-finance/farmers-homeowners-insurance-florida-alternatives-2023-6.