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A Slimmer State Farm May Stay

November 16th, 2009 by Mike Vasilinda

There is a glimmer of hope tonight that perhaps as many as half of the current customers of State Farm Insurance will be able to stay with the company. Negotiations continue between State Farm and the state, and as Mike Vasilinda tells us, some agreement seems imminent.

After State Farm filed for a 47 percent rate hike, Governor Charlie Crist said it would be handled appropriately.

I think you know what I mean by thatrejecting it, Crist said.

After it was turned down, State Farm said it was dropping all 800 hundred thousand of its homeowners policies.

The Governor again said, good riddance.

I think that Floridians will be much better off without them, he said.

But the state and State Farm have yet to agree on how the company will leave Florida. The sticking point is who would pick up the policies. Insiders say there arent enough private insurers to handle the avalanche.

A lot of those policies would have to go to Citizens because the private insurance companies are still too few in number, we think, to pick up all those policies, William Stander, with the Property and Casualty Insurance Association, said.

And growing the state-run insurer is not something the state can afford, financially or politically.

Regulators and State Farm have agreed twice to delay the trial over the company leaving.

Three people with knowledge of the negotiations say State Farm is being offered rate hikes in the neighborhood of 15 percent for two years running and an end to costly hurricane mitigation credits. In exchange the company would keep about half its policies.

The insurance council says keeping State Farm would be good news.

To have a company, a giant like State Farm, no longer participate in Florida, thats not good for the market, Florida Insurance Council Spokesman Sam Miller said.

A State Farm spokesman said it would be inappropriate to comment until an agreement is reached.

Some insiders believe State Farm capitulating to the state would make it hard for other companies to negotiate with the state in the future. The state has consistently said customers will have at least six months notice before a State Farm policy is cancelled.

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