Mercury General Corp. has decided that it will be pulling out of the Florida homeowners insurance market. The announcement was made on Monday and the move comes as reports of a $19 million loss in that particular market in the fourth quarter. The insurer is already making preparations to inform some 8,000 policyholders that their policies will no longer be renewed. Florida law mandates that notices be sent 180 days in advance and the insurer will begin sending them in March.
Mercury General blames their fourth quarter losses on the high amount of sinkhole claims. Other insurance companies are expressing their concern over the issue as many claims are being found fraudulent. The geography in Florida makes the region susceptible to sinkholes and they are an authentic issue, but policyholders are filing claims to repair damaged driveways when there is nothing more than a crack in the cement
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Regulators are attributing the rise in sinkhole claims to the number of public adjusters in the state. The adjusters are hired by the policyholders to seek payment from insurance companies. An article in the Wall Street Journal suggests that these adjusters are encouraging their clients to pursue less-than-legal action in order to recover money from insurers.
Mercury General has stated that they will be fully out of the homeowner’s insurance market in Florida by the middle of 2012. $6 million of their $19 million loss was added to a reserve fund in anticipation of future claims during that time frame.