State Farm to Pay More than $300 Million to Texas Homeowners
If you think Floridians are a tough crowd to please insurance-wise, they don’t hold a candle to Texans, who shoot from the hip when an insurance agent nears.
So the decision by Lone Star Insurance Commissioner Mike Geeslin to unhand State Farm of $310 million should come as no surprise. And it’s no surprise that the nation’s largest home insurer, which has taken an increasingly aggressive stance with state lawmakers, is threatening to appeal … or worse.
A Texas tale is typically a tall one, and this one goes back to 2003 when State Farm was told to cut its rates by 12 percent. The company sued, and the case remained in limbo until Geeslin issued his order on Monday.
Geeslin’s decision may have been prompted in part by next year’s governor’s race. Republican Sen. Kay Bailey Hutchison is challenging Republican Gov. Rick Perry for the party’s nomination. Hutchison is likely to hammer Perry on the fact that Texas has the nation’s highest insurance rates, opines the Dallas Morning News.
This forces Perry’s administration, like that of Florida Republican Gov. Charlie Crist, to veer more toward the populist point of view and favor homeowners - who vote - over insurance companies. The phrase “the refund check is in the mail” would go a long way to help Perry’s reelection bid.
But some say “too little too late.” The $310 million is far less than consumer advocates recommended, and Texas Watch calls it “a slap in the face.” Even the state’s Public Insurance Counsel may appeal the verdict as inadequate. Geeslin himself didn’t offer much of a rationale as to why he picked the $310 million figure. “There is evidence, there is law, and between the two you come up with $310 million,” he says.
State Farm is furious that it has to pay anything at all. Texas home insurance rates are high for a reason: like other Gulf Coast states, Texas has a wide swath of coastline which hurricanes like to visit in the summer and fall.
Hurricane Rita beat up on Texas to the tune of $11 billion in 2005 and then Hurricane Ike, the third most destructive storm ever to hit the U.S., caused $24 billion in damage in 2008
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State Farm spokesman Ken Davis told Insurance Journal that the decision “impacts (us) in a significant manner. We are examining the potential financial and business consequences.”
Sure sounds like traveling music. State Farm has already bid fond farewell to Florida. Is Texas’s time up?
Ed Leefeldt is an award-winning investigative and business journalist who has worked for Reuters, Bloomberg and Dow Jones, and is the author of The Woman Who Rode the Wind, a novel about early flight.
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