State Farm Warms Up to Florida and Decides to Stay

The battling between Florida and its insurers has been notorious and nasty, but perhaps the Yuletide season has made them a little nicer. At any rate, the year-long feud between Florida Gov. Charlie Crist, who is seeking a U.S. Senate seat, and State Farm, the nation's largest home insurer, finally ended just seven shopping days before Christmas, with both sides saying Santa left more presents under their tree.

Florida is glad that State Farm is staying because it desperately needs to insure nearly three quarters of a million homes and businesses. It's also happy that State Farm agreed to accept a "base rate increase" of about 15 percent instead of the nearly 50 percent the insurer originally sought.

For its part, State Farm is smiling like the Cheshire cat. Although a bit exorbitant, the rate request was arguably either a bargaining chip to get Crist to back down - he originally said "Good riddance" when the insurer threatened to leave - or give the insurer a way to get out from under what had been a whopping $20 million a month loss.

For those with short term memories, the peninsula state has the most hurricane exposure. Even though it hasn't been hit in recent years, due perhaps to Charlie Crist's prayers, it was slammed in 2005 by both Katrina and Wilma, and prior to that was hit by four major storms in a single year.

Convinced they couldn't make money major insurers fled the state, forcing homeowners to deal with smaller insurers who may, or may not, survive the next big hit. The other available option was to buy insurance from state-run insurer Citizens, which is normally a last-resort, but at one time insured 25 percent of the state's policyholders.

So just what did State Farm get out of the compromise? The insurer can drop 125,000 of its highest risk customers, usually in hurricane-prone South Florida and along the coastlines. It can keep its lucrative car insurance business, which Crist threatened to take away if the insurer abandoned homeowners. And the 15 percent increase is only a baseline - some policyholders could pay less while others could pay a lot more.

Florida Insurance Commissioner Kevin McCarty got credit for the settlement, while Crist remained quiet as opposition to his candidacy from within his own Republican party grows. Could Charlie be worried that Florida just might say "Good riddance" to him?