State Farm Still Shedding Homeowners

Aug. 09--When State Farm announced it was writing new homeowner policies in Florida this year, it was a startling development for a former market leader that dropped hundreds of thousands of customers during the state's insurance crisis.

Instead of trumpeting what seemed like welcome news, though, State Farm instead went to court. It asked to keep secret data that would normally be made public, information that could confirm the contours of its potentially seismic change. Why? To thwart competitors eager to derail its re-entry into the market, the company said.

But here is what the suppressed state records actually hide from the public: On balance, State Farm is not adding new homeowner policies in Florida at all. It is shedding them.

Despite its avowed campaign to write new business starting in the first quarter, State Farm had fewer Florida property customers as of June 30 (381,284) than it did to start the year (389,109).

Credit State Farm for providing that answer when The Palm Beach Post asked, but the company wants to make that voluntary information it can choose to offer, while off limits for the public to see in state quarterly reports. State Farm agreed to give a statewide number, but declined to say how many customers it cancels or keeps in individual counties such as Palm Beach -- data publicly available for every other major insurer in the state.

The company's attempt to slip behind a wall of trade secrecy defies years of established practice in the state and threatens essential accountability in a regulated industry, consumer advocates warn. If it succeeds, competitors may be quick to copy it across the industry.

"It is awful," said J. Robert Hunter, the Consumer Federation of America's director of insurance and a former consultant to Florida regulators. "Insurers, particularly leading writers, should have transparency so that the public can see if they are properly participating in writing all parts of the state and not ducking their responsibility to make insurance fairly available."

Data declared trade secret

This year, State Farm has declared quarterly data it gives state regulators, including a statewide policy count, a trade secret. Alone among Florida's top insurers, it has disappeared from official lists of the leading carriers. It is off the grid.

"State Farm Florida Insurance Co. has filed data as a Trade Secret, and is therefore not included in this database and market share is not shown for this quarter," a note from the state insurance office says for the quarter ended March 31.

In a lawsuit filed in May in Leon County Circuit Court, State Farm argued "much, if not all" of its quarterly data reports to the state should be withheld from competitors -- and thereby hidden from the public.

In July, the state's Office of Insurance Regulation questioned whether the data is properly considered a trade secret. That's a question for the court to decide.

The company maintains its "associates spent valuable time and resources to determine how to best re-enter the market and have gone to great expense to develop its plans for identifying and rating risks. Because Florida is a competitive marketplace, many competitor insurers would like to have access to State Farm's current data contained in the (state) reports, thereby potentially undermining the value of this work to State Farm."

Having access to the "specific level of detail that is included in the report" gives rivals "valuable information to use to undermine State Farm's marketing advantages," the company's filing says.

It's part of a "disturbing trend," said Birny Birnbaum, executive director of the Texas-based Center for Economic Justice. He has testified as a consumer advocate in a range of insurance proceedings in Florida and other states. He sees "profound implications for the public holding insurers accountable for their market performance and regulators accountable for carrying out their regulatory responsibilities."

Shedding policies

There's a lot of history here. State Farm, contending it could not make enough money to cover Florida risks without higher rates, shed more than 464,000 property insurance customers between the first quarter of 2009 and the end of 2013. That was well over half its more than 850,000 customers from five years ago. The expulsions forced hundreds of thousands of Florida residents to scramble for other coverage such as from state-run insurer Citizens, which swelled to 1.5 million customers a couple of years ago.

In Palm Beach County, State Farm had more than 50,000 customers in 2009 but 12,733 policies by the end of 2013, compared with about 100,000 for Citizens.

On Feb. 3, State Farm announced an expanded offering of homeowner and renters policies accommodating in-state transfers, customers moving in from other states, and "a limited number of new customers," spokeswoman Michal Brower said. "While limited in scope, this is a positive step that may offer State Farm customers additional opportunities to purchase homeowners coverage. We recognize the unique challenges of the Florida insurance market, and continually evaluate and monitor our ongoing efforts to responsibly manage our growth in Florida."

But so far, policies still seem be going down. So why go through all this?

A law that state officials confirm is still on the books says this: " No insurer writing private passenger automobile insurance in this state may continue to write such insurance if the insurer writes homeowners' insurance in another state but not in this state unless the insurer writing private passenger automobile insurance in this state is affiliated with an insurer writing homeowners' insurance in this state."

State regulators and the company were not commenting last week on whether that law has any relevance to this year's proceedings. But attempted enforcement at some future date might depend on a definition of writing homeowners' policies: Is writing or renewing at least one homeowner policy enough? Writing in every ZIP code? Officially writing new business? Statute 624.4055 does not seem to say.

Largest car insurer

Future enforcement, if any, also might depend on who is charge in Tallahassee. Former Gov. Charlie Crist, who famously clashed with State Farm, is trying to unseat incumbent Rick Scott this fall.

A State Farm company remains the largest individual car insurer in Florida, but it has been losing premiums for years and as a group Geico/Berkshire Hathaway passed State Farm in 2012 in premiums and held a $2.7 billion to $2.4 billion advantage in 2013, state records show.

That's another reason why public perception of State Farm's commitment to the Florida property market might matter. Many customers like discounts for having car and home policies in the same place. But customers who lost property coverage from State Farm might not be in a cheerful mood to renew auto coverage.

Agents have kept some customers by putting them in Citizens policies, but the state-run insurer is shrinking and a new computerized clearinghouse this year is moving additional Citizens customers to State Farm's private competitors.

If there are any benefits to be gained from public perception that the company is recommitted to Florida, they could be undercut if data shows the company is still dropping homeowners, or not writing new business in particular parts of the state.

Trying to declare the property data secret is only the latest twist in a long-running saga. By its own account in its court filing, State Farm tried a similar move in Florida in 2007, encountered an unfavorable court ruling and chose to give up for a time. Meanwhile, a number of insurers have tussled in Florida and other states over issues such as whether data that goes into health insurance rates should be considered a trade secret, for example.

But the refusal to let the public know fundamental facts such as how many customers a property insurer has from quarter to quarter -- in counties as well as statewide -- concerns advocates.

Seeing how many policies a company cancels or does not renew in a local market can help consumers decide whether a carrier is a good bet or a risky depository of their trust. If a lot of customers leave on their own, it can be a clue they are not happy for some reason: The company is raising renewal rates, taking a tough stance on paying claims or failing to provide good service.

"There's a significant public interest at stake here," said Barbara Petersen, president of the First Amendment Foundation, a Tallahassee-based group that pushes for open access to records.

She calls it "critically important" that the public can see what companies are doing, not just what they are saying.

"Without access to the records submitted by insurance companies like State Farm, we're basically in the dark," she said.

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