Accident & Injury Law in Texas

Posts Tagged ‘State Farm’

State Farm Insurance was slapped on Monday with a far-reaching state order that calls on the state’s largest insurer to refund $310 million to its Texas home insurance customers for overcharges dating back to 2003.

Texas Insurance Commissioner Mike Geeslin said that State Farm, which provides coverage to 1.2 million Texans, must pay up after fighting state regulators for several years to avoid the refunds that Geeslin and consumer advocates say are owed.

State Farm officials,  who have said the company owes nothing, were not immediately available for comment. The company has 10 days to file an appeal, which could delay any refunds until the courts rule.

The refund amounts to 6.2 percent of policyholder premiums for customers insured by State Farm. Lloyds— the company’s home insurance arm – from September 2003 to August 2004. For customers insured from September 2004 to July 2008, the refund amounts to about 3.4 percent of premium for each year they were insured.

“The commissioner found State Farm Lloyds rates were excessive and is ordering State Farm Lloyds to pay refunds,” Geeslin said in a summary of his order released late Monday.

The amount that State Farm was ordered to pay was less than what the state’s public insurance counsel was seeking — about $1 billion — as Geeslin followed the recommendations of his staff for a lesser amount.

“There is evidence, there is law — and between the two, you come up with $310 million,” he said.

Alex Winslow, head of consumer group Texas Watch, called the order an insult to policyholders.

“This is a joke. There is no doubt this refund is a pennies on the dollar settlement,” he said, adding that he wouldn’t be surprised to see the case drag on another six years if State Farm appeals.

The decision is being closely watched in part because insurance could become a pivotal issue in next year governor’s race: U.S. Sen. Kay Bailey Hutchison has indicated she will make insurance rates a major part of her campaign to unseat Gov. Rick Perry.

The rate dispute, dating back to 2003, began when the insurance department ordered State Farm Lloyds and several other insurers to reduce their premiums because they were deemed excessive.

The order stemmed from an insurance reform law passed by the Texas Legislature that year that put home insurance rates under state control after a period of record premium increases.

State Farm, which was told to cut its rates by 12 percent, responded by suing the state.

In the most recent ruling, Geesling was told to convene a hearing on the overcharge allegations and listen to evidence from State Farm, the insurance department and the state’s consumer advocate.

State Farm attorneys had said during hearings this year that a refund totaling hundreds of millions of dollars could be “crippling” for the company.

The attorneys also noted that the insurer is still paying off a $1 billion loan made by its parent company six years ago to stave off bankruptcy.

Texas leads the nation in the decline in fatal crashes involving teen drivers. Fatalities involving 16 to 19-year-old drivers fell 33 percent from 2002 to 2007, more than double the national rate of decline,
according to a study released Monday.

Driving experts attribute the decrease to the rigorous multistep program Texas teens must endure to get a driver’s license, along with a push for peer-to-peer education programs high schools, according to the study by the Texas Transportation Institute at Texas A&M University.

Officials said driving-related deaths m 2007 were the No. 1 killer of Texas teens.

More than 300 Texas high schools have peer-to-peer education programs, which help teens talk to one another about the dangers of unsafe driving behaviors such as texting while driving, speeding and not wearing seat belts.

Nationwide, more than 5,000 16- to 19-year-olds die in car crashes each year. In 2007, the most recent year for which statewide data were available, 419 teens died in crashes.

The transportation institute study, funded by the Texas Department of Transportation and State Farm Insurance, compared teen fatality rates in Texas with other states that kept at least five years of graduated driver’s license data. Graduated driver’s license laws restrict new drivers but offer more freedom as they grow older and typically include a permit stage followed by a provisional license. In Texas, the graduated driver’s license law, passed in 2001, limits the time of day young drivers can be on the road. It also bans them from using cell phones while driving.

Texas is among 33 states to earn a rating of good, the highest offered by the Insurance Institute for Highway Safety for graduated license programs. Ten states were rated fair, seven marginal and none poor, the-lowest.

In 1995 Texas dropped the road test as a requirement for getting a license; studies show teen auto fatalities increased soon afterward. But fatalities started to fall in 2002 once Texas brought peer-to-peer Safe driving programs into highschools. More than 250,000 Texas students participated in the Teens in the Driver Seat program in the 2008-09 school year.

The program receives about $900,000 from the state and $100,000 from State Farm. Officials say they would need several times that amount to reach their goal of expanding the program to all Texas high schools.

State official to determine if insurer overcharged customers, by how much

Pick a dollar amount between zero and 1 billion. Depending on whom you ask, that’s what State Farm Insurance owes its Texas customers for overcharging on homeowner policies dating to 2003.

The Office of Public Insurance Counsel, the state’s consumer advocate for insurance, says in documents filed this month that Texas’ largest property insurer owes policyholders $785 million plus interest or nearly $1 billion. State Farm has 1.2 million customers in Texas.

The Texas Department of Insurance calculates the overcharges at about $251 million, plus nearly $100 million in interest.

State Farm says it owes customers nothing, that it didn’t overcharge them and that its rates have always been fair and competitive. The dispute dates to 2003 when Texas ordered State Farm and other companies to reduce premiums the state considered excessive.

State Insurance Commissioner Mike Geeslin will have to decide who is right.

According to Alex Winslow of State Watch, a consumer group active in insurance issues, “There are now real questions about whether State Farm will have to give back every penny they owe or whether the commissioner will let them off and order them to pay only pennies on the dollar. Any decision by Geeslin that is short of the full $1 billion will be ‘a slap in the face’ for State Farm policyholders.”

“State Farm should not be allowed to benefit financially in any way from their overcharges, including investment earnings off those overcharges,” he added.

State Farm said in its filings that it is not responsible for any refunds.

“Our position has never changed. Our rates have always been fair and reasonable,” spokesman Kevin Davis said.

The rate dispute began after a massive overhaul of insurance law by the Legislature in 2003, which put home insurance rates under state control after a tumultuous period of record premium hikes.

The increases were triggered by massive mold and water damage claims across the state.

State Farm was told to cut its rates 12 percent; it responded by suing the state in a case that remains unresolved.

Geeslin is expected to or der some refunds, although probably less than the $1 billion called for by the public insurance counsel.

A figure that large “would make the largest Texas homeowners insurer insolvent,’ and the department’s $350 million proposal would under mine the company’s financial condition for several years State Farm attorney Susan Conway wrote this month.

During the hearing in the case, State Farm attorney said the insurer is still pay ing off a $1 billion loan that it had to take out from its parent company to stave off bankruptcy six years ago when mold claims were at their peak.

Mississippi Attorney General Jim Hood said that his office has settled its dispute with State Farm Insurance Cos. over how the insurer handled Hurricane Katrina damage claims in Mississippi.  State Farm has complied with a 2007 agreement by reopening some claims and agreeing to pay more than $74 million more to policyholders whose homes were damages or destroyed.

Sad that the attorney general has to step in to make them perform.