Farmers pulls back from Florida as it looks to manage risk exposure

Farmers Insurance has announced a pull-back from Florida, with the carrier set to stop writing new Farmers-branded auto, home, and umbrella policies in the state, as the company looks to manage its exposure there.

The news comes after Farmers Insurance announced an easing-back from property insurance exposure in California recently as well, effectively looking to cap its exposure there.

In Florida, Farmers Insurance said it will implement a process to stop renewals of existing Farmers-branded policies, so it won’t distribute products through its exclusive agent channel in the state.

The move only affects the Farmers-branded insurance products, the company told its agents, with other brands not be affected, including Bristol West, Foremost, Foremost Choice and Foremost Signatures policies.

The insurer said, “This decision came after several months of rigorous work and analysis to try to find alternative solutions to manage risk in Florida.

“Ultimately, we were faced with making the difficult decision to withdraw our Farmers-branded products from the state.”

Reinsurance costs are likely a significant factor here, alongside the claims trends and loss amplification seen in the state, with Florida becoming a far less profitable region for a major carrier, that has options to write elsewhere, to operate in.

The insurer also said, “We recognize this transition won’t be easy, and we’re committed to supporting agency owners as they look for their next opportunities.”

Farmers’ move has drawn a stern response from the Florida Insurance Commissioner, Michael Yaworsky, who sent the carrier a letter to express his “disappointment” at the way the exit has been communicated.

Yaworsky said “we are disappointed by the hastiness in this decision and troubled by how this decision may have cascading impacts to policyholders.”

Farmers move is another signal of the challenges faced by Florida’s insurance market. But alongside its move in California, can perhaps be viewed as a reaction to rising catastrophe and weather risk exposure, in a time of higher reinsurance pricing, as well.

Carriers are losing confidence in their ability to charge risk-commensurate rates that will also cover all of their costs, in every region they operate. It’s no surprise to see them react and so these moves could become more frequent, as insurers look to manage their books more profitably.