Posted on Thu, Feb. 01, 2007

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State Farm drops coastal policies

Nearly 1,000 homes to lose wind coverage

By Jenny Burns

The Sun News

State Farm Insurance Co., South Carolina's largest insurer of homes, said Wednesday it will drop almost 1,000 policies for homes on the oceanfront.

The company's decision comes about a month after Allstate said it would drop 12,000 policies in order to minimize future hurricane risk.

S.C. Farm Bureau Insurance started dropping 3,000 customers along the S.C. coast last fall.

State Farm customers are finding out about the nonrenewal this week from their agent, said Bruce White, spokesman for State Farm in South Carolina. The company is giving 90 days' notice for policies that would have been renewed May 1.

"The good news is we're keeping 99.5 percent of the policies we have in South Carolina," White said.

State Farm holds 26 percent of South Carolina's homeowner's policies and is dropping 0.5 percent of them. Allstate holds 15 percent of the homeowner's policies, while S.C. Farm Bureau holds 7 percent. The companies say nonrenewals are necessary to reduce coastal exposure and ensure they have the resources to pay for a hurricane strike.

Customers who have discounts for also having their car insurance with State Farm will continue to get that car insurance discount, White said. "We decided not to penalize the policy holder on their auto because we are making a decision on the homeowners," he said.

Tom Maeser, president of the Fortune Academy of Real Estate, said he thinks the insurance companies have too much freedom to change where they will insure properties.

"Why do they have the ability to arbitrarily set a line [from here to the ocean]? What they're saying is, 'Every time we want to cancel insurance, we want to change that line,'" Maeser said.

S.C. Farm Bureau said it mapped out its properties to see how each would contribute to its risk in case of a hurricane, and chose homes based on construction type and potential risk in scattered locations.

Farm Bureau is urging the legislature to expand the wind pool - the state's insurer of last resort - because it would mean the company wouldn't have to drop more policies.

"If we get hit with a hurricane and we see reinsurance costs skyrocket, we will have to re-evaluate our numbers," said Susan Merrill, Farm Bureau spokeswoman.

"If the wind pool is expanded, it would reduce the number of nonrenewals. It would allow us to continue to write homeowner's [policies] minus the wind."

Oceanfront condo owner Peggy Grant, 72, who was dropped by Allstate, said she's decided not to buy a new policy because her condominium is built of cement - and because the increases in her association fees for insurance have already cost her too much.

"If the government or state doesn't do something, I don't know what people are going to do," she said.