Consumer activist Ralph Nader is calling for a nationwide boycott of State Farm Insurance Cos. to pressure the firm into writing more homeowners policies in hurricane-ravaged Florida and Louisiana.
Nader and J. Robert Hunter, president of the National Insurance Consumer Organization, charged that led by State Farm, the property-casualty insurance industry was using extensive losses from Hurricane Andrew last year as a pretext for raising rates.Restricting new business will "further fuel the level of anxiety so that those who have coverage will be willing to pay any price," Nader told reporters.
Nader called on consumers nationwide not to purchase policies from State Farm and the American International Group of Cos., which has notified regulators in Louisiana that it will no longer underwrite policies in coastal areas damaged by Hurricane Andrew.
State Farm, the nation's largest underwriter of homeowners' insurance, has announced that it is limiting new business in Florida and Louisiana, two states where it paid out $3.8 billion in claims for damage from Hurricane Andrew.
The company is also limiting new business in Hawaii, where it paid out $145 million in claims for damage resulting from Hurricane Iniki last fall.
"We are not wholesale abandoning our policyholders," said State Farm spokesman Bill Sirola. "What we are making sure is that as we grow, we don't outgrow our ability to serve our customers."
Sirola said State Farm does not want to increase its 25 percent market share in Florida or Louisiana.
The company lost $1.2 billion last year, the firm's first losing performance since 1969. Insurance industry officials noted that 10 companies went bankrupt as a result of claims they were forced to pay out after Hurricane Andrew.
There was no immediate comment from AIG.