Insurers including Progressive Corp. and Allstate Corp. have stopped issuing policies on new cars in certain Florida counties, hindering vehicle sales days before Hurricane Irma is forecast to hit the state.
The companies may be overreacting to losses incurred last month related to Hurricane Harvey and refusing to issue coverage, Ted Smith, the president of the Florida Automobile Dealers Association, said by phone. State Farm Mutual Automobile Insurance Co. is still issuing coverage and waiting until a national hurricane advisory before halting new policies, he said.
“If you take us out of business for a week before a storm even hits and maybe a week after, you can imagine the impact, not just on consumers who are inconvenienced but the state’s economic resources,” Smith said. “I’m urging through our public officials that they talk to these insurance companies and make sure they follow the policy of State Farm — wait until there’s imminent danger before you stop writing cars.”
Hurricane Irma, which Barclays Plc estimates could cause as much as $130 billion in damage, was headed to Puerto Rico this afternoon and may reach Florida this weekend, the National Hurricane Center said. The insurance industry has already taken a hit from Hurricane Harvey, which inundated the Texas coastline and left parts of Houston, the fourth-largest U.S. city, under feet of water.
Progressive has put binding restrictions on new customers in some Florida counties, said Jeff Sibel, a company spokesman, adding that insurers often do so ahead of storms. Allstate has a property and auto moratorium in place in 23 counties, according to April Eaton, a spokeswoman. The companies are the third- and fourth-largest auto insurers in the state, according to according to data compiled by A.M. Best Co.
Insurers may face more than $10 billion in claims from Harvey, according to FBR & Co. A strike from Irma could be the first time since 1964 that the U.S. was hit by back-to-back storms of Category 3 or more.
Analysts at JPMorgan Chase & Co. and Consumer Edge Research LLC estimated Harvey reduced the seasonally adjusted annualized rate of U.S. auto sales in August by as much as 400,000 vehicles.
The pace of vehicle deliveries slowed to 16.1 million, according to researcher Autodata Corp., missing analysts’ average estimate of 16.4 million. Some projected before the storm made landfall that the industry would have its first monthly sales gain this year.
Barry Frieder, the president of Potamkin Automotive, which owns three dealerships in Miami, said that insurers stopped writing policies beginning Tuesday.
“We’ve kind of been out of business since yesterday,” he said.
Florida dealerships generated $70 billion in automotive retail sales last year and about $4.2 billion in retail sales tax revenue, according to Smith.