Hotsohbet.Net

Some folks took risks on buying homes 2-3 years ago with the thought that home prices would continue to increase and they would make off with a good ROI (sometimes with no money down at all). Others took the risk of not buying and possibly seeing the prices of housing running up to a level that those individuals could be priced out of the market forever (like the 1970’s steep increases). Paulson/Bernanke are making it sound like they are alleviating risks took by investors -but this can only be done at the expense of others that took risks (and, should be rewarded accordingly when markets show favor to their strategy). Those that have saved money are being robbed through purposeful devaluation of the currency by those that believe that some folks risk taking is more important than others. This is not right -it can not even appear to be right. There is rhetoric which can be used to try & justify such events -but, even the rhetoric doesn’t feel right.

So, when a neighbor doesn’t pay his VISA card bill at the end of the month, we should all chip in? VISA factors in potential losses -if they do a bad job of this, they might go out of business and people with use AMEX or other companies will pop up instead. In fact, when folks don’t pay their credit card bill, VISA (well, via the banks that actually hold the debt) sell that “bad debt” off to collection agencies. Check into it -there’s a whole industry out there around bad debt collection. And, guess what, it doesn’t involve the debt holder knocking on a few neighbors doors asking them to chip in. I hope that many adamantly oppose both the bailout bill and the whole theory around this anti-capitalistic crap -and specifically harass their elected officials until they get the idea.

What I do KNOW is that Bernanke said quite emphatically at his confirmation hearings that we were not in a housing bubble. How he could reach that conclusion, even in 2004 is a mystery. And he was clearly right on this wasn’t he?

Paulson, Bernanke and the White House encouraged this type of behavior. If somebody making 10 bucks an hour and can buy a 400K house with an Alt A mortgage and intends to flip it who do you think made that opportunity possible? Of course the average guy will take advantage of the opportunity but who made that possible? Should the investor that made this possible and took the paper be protected? Securitized paper should be just what it says…if there is a default get the underlying asset as compensation. Because prices dropped its not fair to bail out the investor…they made this possible in the first place.

For years State Farm Florida Insurance Company has remained one of the few Fortune 500 homeowners insurance companies still doing business in Florida. It is still by far the largest private insurance company in the state for both homes and autos covering 1 million and 2.5 million policyholders respectively.

They deserve credit for that.

After all, following the billions in claims from Hurricane Andrew in 1992, many large insurance companies simply left the State of Florida for good – and never looked back. That left Florida to deal with the problem on its own and caused it to create its own state run insurance company of last resort to help those who simply could not find coverage.

State Farm Florida Insurance Company did not follow this approach.

It has taken a prudent approach to the market that has been present in Florida since Hurricane Andrew. These steps have included:

Strict underwriting criteria for homes selected for new business

Multiline discounts for policyholders with home, auto, and life coverage

Selectively cancelling higher risk older homes closer to the coastline

This approach might have been successful during normal, reasonable periods of history. But things in Florida have been anything but reasonable in recent years:

From 1992 to 2004, no large insurance companies re-entered the Florida home insurance market – leaving State Farm on its own.

Florida hurricane claims in 2004 and 2005 caused billions of dollars in damage. State Farm Florida paid millions in claims and had to request an emergency cash infusion from its parent company to recapitalize it.

While the company was able to get significant rate increases after the 04/05 hurricanes, massive rate increases granted to most of the companies in Florida in 2005 and 2006 caused a major political uproar. Quite honestly, the public demanded rate relief because Florida home insurance was simply not affordable.

The pressure for lower rates was far worse due to outrageous property taxes and the collapse of the Florida real estate market.

The State of Florida reacted to voter pressure. But the results were not impressive.

The 2007 and 2008 legislation had a minimal effect on lowering homeowners insurance rates and shifted billions of dollars in catastrophic risk to the Florida Hurricane Catastrophe Fund – a state entity that has publicly stated that it can’t meet its reinsurance obligation to insurance companies in part due to the frozen bond markets.

As a result, all companies including State Farm Florida are concerned that the Florida Cat Fund won’t be there to pay them back after a major hurricane and are looking for new sources of backup reinsurance.

That, combined with other factors led the company to request a 47% rate increase a few months ago. After state regulators rejected the rate increase, the company appealed that decision in court. Recently a judge agreed with state regulators that State Farm’s 47% rate increase was not justified and also rejected the rate increase.

This brings us to where we are today – a time when many Floridians have to be wondering if State Farm Florida is preparing to exit the state for good. This would not be welcome news and would cause a major shock to the Florida homeowners insurance market as policyholders scramble to find other coverage.

In today’s uncertain times, you have to be ready to face realities. One of those might be that State Farm will cancel or drop your homeowners insurance coverage in Florida. If that happens there are several things you need to do to respond to this:

Shop your policy. Most State Farm Florida agents can only offer you homeowners coverage with Citizens after your policy is cancelled. Find a large independent agent who represents multiple companies in order to give you the best options for replacing State Farm Florida.

There are new Florida base regional insurance companies that have been created over the past 15 years, with many only being recently approved since the start of 2006. Some of these companies might be a good option to replace State Farm but you have to research each and every one of them. Check their financial ratings and customer service history thoroughly.

State Farm Florida insurance agents will be hurt by mass cancellations of home insurance policies. They have spent years building a book of insurance business in Florida. When they lose your home insurance business, they often lose your auto and life insurance business as well. While you can’t help but be sympathetic, you need to know that it is in your agent’s self interest to keep your auto and life insurance business while putting your home insurance coverage into Citizens Property Insurance. Don’t accept being placed with Citizens without looking for other private home insurance companies through other agents that can also offer you auto and life insurance.

Get all the facts if you are thinking about Citizens Property insurance. Citizens has said that it does not charge enough premium to cover the risk that it takes. It too is expecting problems borrowing to pay its claims after a major hurricane in today’s troubled bond markets. Major recommendations being presently considered at Citizens include raising rates, limiting coverage, and mandating certain home hardening measures. Do your home work on Citizens just like you would for any other company.

While we don’t know how the final situation with State Farm Florida will play out, if you follow these steps you’ll be way ahead of hundreds of thousands of policyholders that might be scrambling to get coverage all at once.