TDI Freezes Farmers’ Homeowners Rates

The Texas Department of Insurance has issued an emergency cease and desist order against Farmers subsidiaries Farmers Insurance Exchange and Fire Insurance Exchange that effectively freezes the carrier’s homeowners insurance rates.

The order prevents Farmers from initiating any additional rate increases based on their current unfair practices and gives the company 90 days to develop and implement a new corrective plan to remedy their unfair pricing practices.

In addition, TDI will seek restitution for Farmers customers who have been overcharged due to the company’s alleged illegal rating practices.

Texas Insurance Commissioner Jose Montemayor claimed that Farmers’ own actions made it necessary to issue the order.

Last week, Attorney General John Cornyn filed a lawsuit against Farmers Insurance Group for violations of the Deceptive Trade Practices Act and discrimination against some groups of homeowners through the company’s illegal rate-setting policies. The emergency cease and desist order issued is a separate action intended to bring a halt to Farmers present rate-setting practices.

Both the lawsuit and the emergency cease and desist order are the result of investigations that Governor Rick Perry directed Montemayor to conduct and requested General Cornyn to pursue.

The investigations currently ongoing into the rating practices of Farmers and other insurance companies are very comprehensive in scope. These investigations involve detailed reviews of internal and confidential documentation related to business practices, financial information, actuarial procedures and individual policies.

In other action, Commissioner Montemayor and Public Insurance Counsel Rod Bordelon announced that they were taking steps to develop new homeowners initiatives at the direction of Governor Perry. These new initiatives include:

Underwriting Reform – TDI will take steps to develop a rule to underwrite based on a homes current condition rather than automatically rejecting coverage based solely on previous water claims. A home’s market value or insurability should not be affected if previous damage is fully repaired.

Residual Market – TDI has a Market Assistance Program to place some homeowners in underserved areas with insurance carriers. Further development of a more broad residual market plan for all levels of risk is warranted as the Texas market undergoes changes in the next few years.

Marketing Efforts – TDI will take steps to improve efforts to match consumers and insurance companies in the existing open market. This initiative differs from a residual market, which assists homes that are unable to obtain insurance.

These measures are in addition to the rate oversight, claims response, anti-fraud, and consumer choice initiatives unveiled by Gov. Perry earlier this year.

Topics Texas Agribusiness Homeowners