According to State Farm’s Alabama vice president for agencies, Karen Cutter, “we must continue to manager our property-loss exposure along the coast for the sake of all of our policyholders.” State Farm is Alabama’s largest home insurer and also has the largest chunk of market share on the Alabama coast.
Not too surprising that this announcement follows an agreement by State Farm to fork over “$80 million to more than 600 Mississippi policyholders who sued over Katrina damage and proposed a class action settlement to pay at least $50 million more to resolve thousands of other potential Katrina claims in three coastal counties.”
Specifically the properties affected by the State Farm decision are those “within about 1,000 feet of the shoreline of the Gulf of Mexico, Mobile Bay and its connected bays.”
The basic concept of insurance comes into play with this decision by State Farm. There is too much risk concentrated in one area to be able to spread it all over their policies. Or on the other hand one could be amazed that 2,600 policies would have that much of an effect on their business considering those policies are “less than 1%” of their total policies in force in Alabama. What is your take on this important issue?
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