State Farm to Stay Out of Flood Insurance Business
State Farm Insurance Co. decided recently that it will no longer write new flood insurance policies with the National Flood Insurance Program (NFIP), but that it will continue to service existing policies, and its agents will go on helping their customers obtain flood coverage via the NFIP’s direct distribution channel.
Phil Supple, a State Farm spokesman, explained that recent disruptions in the federally-backed flood insurance plan were factors in the decision, but that there were other reasons, as well.
Specifically, Supple said, State Farm wants to focus on its core business, the products it actually provides, and on making sure the needs of its policyholders are met. Currently, the insurers has slightly over 800,000 flood policies in place, and the amount of paperwork involved when disruptions – such as the current moratorium on writing new policies – occur with the NFIP is “overwhelming.” Supple went on to say that even if Congress reauthorized the flood program for a significant amount of time, his company would likely not re-enter the market because the program pulls resources away from other needs.
“Say we have a catastrophe with hail … $200 million in an afternoon in Tulsa, Oklahoma. And you’ve got 50,000 cars, so we’ve got a lot of adjusters there. And then let’s say there’s a flood on the Mississippi somewhere. Then we’ve got to take people off of that and send them somewhere else. That’s another piece of the puzzle, but not the only one,” Supple said. “Moving these policies to NFIP Direct will let us concentrate on our customers needs, on our products,” he added.