State Farm says sinkholes, such as this one that swallowed a Frostproof home in 1991, are the reason it needs a 30 percent insurance rate increase approved. (Photo courtesy of State Library and Archives of Florida.)

By Ralph De La Cruz
Florida Center for Investigative Reporting

If these folks were my neighbors, I’d be calling the police.

State Farm Insurance — the “like a good neighbor” people — are hitting up the Office of Insurance Regulation for a rate hike of nearly 30 percent.

Thirty percent. Actually that’s the average. Some folks may see hikes go up as high as 287 percent.

Apparently State Farm Florida is going broke. Again.

In 2009, State Farm Florida threatened to pull out of the state because — surprise! — they were losing money.

That same year, State Farm Insurance Cos. made $777 million, although chairman and CEO Ed Rust Jr.’s income fell from $13.66 million in 2008 to a mere pittance of $9.44 million in 2009.

It’s a shell game that involves moving money from one company to another. The parent company takes your premiums and invests it in other companies or in re-insurance, and the Florida company takes the risk.

And then, when there are problems, the state company suddenly doesn’t have any money and they complain to state regulators that they have to take out a loan from the parent company to stay afloat. And they get their juicy rate hike.

In 2006, they were granted a 52.6 percent increase. It was another 14.8 percent in 2009 (yeah, somehow they were convinced to stay). Hey, that was a bargain. They had been asking for 47.1 percent (on top of the 52.6 they got just three years earlier). And when the state balked, State Farm took Florida to court.

That’s been the strategy ever since the state began allowing these Florida-only subsidiaries to exist.

This time the problem, we’re told, is sinkholes in the western part of the state. State Farm Florida says the sinkholes cost them $351 million over three years.

Of course, with 679,000 policyholders in Florida, it would seem that paying out $117 million a year would be small potatoes. And if sinkholes are the problem, why do they want to hammer people who live in coastal areas on the east coast? I guess sharing risk is the right thing to do within a state, but not so much nationwide.

I suppose next year, the problem will be lightning strikes. Or too much rain.

Julie Patel of the Sun-Sentinel does an excellent job of putting it all together.

The only solution, it seems, would be for Floridians to call State Farm’s forever-bluff and cancel both their State Farm Florida home and auto policies. Maybe then they’d finally get the message.

Hey, there’s always state-run Citizens Insurance.

Well … actually … Gov. Rick Scott wants to raise Citizens’ rates to drive homeowners toward the free market.

“I believe that in a free market economy, prices will come down,” Scott said.

Uh … sure.

I like state Sen. Steve Geller’s response.

“Republicans and the industry say that raising rates will lower rates,” Geller said. “I believe that. I also believe in the tooth fairy.”

Hope it’s a quiet storm season.

You have until Feb. 22 to send your comments or concerns about the rate hike to the Office of Insurance Regulation. Send an e-mail to and include “State Farm Florida” in the subject line.



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