December 6, 2010- Many of you may remember State Farm’s very public announcement that it would leave the Florida coast and nearly half a million customers uninsured because it could not profit in a state with so many storms.
An article published December 5, 2010, by investigative reporter Paige St. John of the Herald-Tribune, finds that State Farm never really left Florida.
In fact, State Farm may have used such fear tactics to make an easy profit from homeowners in dire need of coverage. Further, after State Farm announced it would leave Florida, an increased demand for the company’s insurance allowed it to command some of the highest rates in the world.
After State Farm dropped thousands of its customers, they were referred to a back-door insurance company by the name of DaVinci Reinsurance Ltd—an offshore company without physical office space or any employees of its own that sells policies to insurers that need to cover their storm losses.
This corporation was started in 2001 by State Farm and a Bermuda reinsurer with which it keeps a close relationship. Despite its lack of physical presence, DaVinci provided coverage to more than 50 Florida insurance carriers and covered 3.7 million homes last year alone.
Through DaVinci, State Farm continued to cash in on thousands of prior customers who were told their homes “were too risky to ensure.” And without a hurricane, the $300 million in Florida premiums paid to Davinci from 2006-2009 has been mostly profit.
To read the entire article from the Herald-Tribune, Click here.