State Farm cuts back on home insurance
Advertiser Staff and News Services
BLOOMINGTON, Ill. — State Farm Insurance Co., the nation's largest insurer of homes, is cutting back or placing a moratorium on writing new homeowner policies in more than 20 states because of recent losses.
The Bloomington-based company began notifying regulators in those states this week. The action is intended to counter a net loss of $5 billion reported in 2001, when a series of natural disasters caused claims to increase dramatically, State Farm spokesman Phil Supple said yesterday.
Refusing to take on new business will shelter the company from taking on additional liability, Supple said.
"Growth in insurance is not always a good thing," he said.
In Hawai'i, State Farm officials said last week that they will limit the number of new home insurance policies their agents write, because of rising claims costs and the insurer's rapidly growing share of Hawai'i's home market.
Customers who already have homeowner policies with State Farm will not be affected, the company said. Supple said State Farm insures more than 15 million homes nationwide.
Decisions on refusing or curtailing new business are being made at the company's 13 regional offices, Supple said. According to Supple, the cutbacks are temporary.
"We certainly will be revisiting all of these decisions and return to the marketplace when the business environment allows us," he said.
State Farm said yesterday that it is no longer issuing homeowner policies for new customers in Arkansas, Kansas, Louisiana, Missouri, Oklahoma, Texas, California, Montana, Oregon, Washington, Idaho, Hawai'i, Alaska, Maryland, West Virginia and North Carolina.
State Farm has also restricted sales in Arizona, New Mexico, Colorado, Utah, Nevada and Wyoming. Supple said there is a cap on the dollar amount of new insurance that will be written in those states.
Last year, the company announced plans to pull out of New Jersey's auto insurance market altogether.
Adam Klauber, an insurance industry analyst for Cochran, Coronia & Co., said State Farm is following a trend in the industry.
He said rates for homeowner insurance are often underpriced and the dollar amount of claims is rising nationwide, so other companies have either cut back on new policies through tougher underwriting standards or placed moratoriums on new policies in some areas.
Klauber said State Farm's temporary refusal to write new policies could make it harder for consumers to get coverage in areas where obtaining homeowners' insurance is already difficult.
Regulators and competitors said yesterday that State Farm's decision to begin restricting the number of new homeowners' policies it writes in Hawai'i should not affect prices or the availability of coverage for new homeowners.
They said there are enough insurers operating in the market to meet any demand.
A historically slow real-estate market that is only now beginning to recover its financial legs has kept demand for new homeowner policies relatively low, officials in the insurance industry said.
