The Farmers Insurance Group of Companies announced it will not renew current homeowners insurance policies in Texas beginning November 2002, and will no longer be able to provide the state’s customers with homeowners insurance coverage from thereafter. The decision to non-renew will affect approximately 700,000 customer households.
Farmers announcement came on the heels of a settlement offer proposed by the Texas Department of Insurance (TDI) that the department hoped would entice Farmers to continue offering homeowners policies in Texas. With the decision to non-renew, however, Farmers shunned effectively TDI’s offer, stating that the resolution proposal reveals a lack of understanding and unwillingness to negotiate on the part of the state.
Farmers previously announced it would halt all new homeowners business effective October 31, 2002. With $1.3 billion in losses in Texas homeowner coverage over the last two years, including $435 million in the first two quarters of 2002, Farmers noted that TDI’s unwillingness to conduct reasonable and realistic negotiations has left it with no other choice than to close its Texas homeowners services as a means of survival. All other Farmers services in Texas will be unaffected—including Automobile, Umbrella, Flood, Commercial, Life insurance and financial services.
“We have made every attempt to continue offering homeowners insurance to the people of Texas and we take this action with deep regret,” said John Hageman, Texas State Executive Director for Farmers. “Farmers and its more than 4,000 employees and agents have been committed to Texas for 50 years. We are taking this step because the terms and conditions currently ordered by the TDI would result in our continued financial losses which puts all our customers at risk and is unacceptable from a business standpoint. We find the grounds for the Department of Insurance’s recent legal actions to be without merit,” said Hageman.
Hageman explained that Farmers’ primary concerns have become lost amid the election year rhetoric that has taken center stage. As a result, many people will be affected negatively when all that is needed is a good faith discussion of the facts.
“The real issue here is the allegation of unfair pricing practices, which is completely false,” said Hageman. “We continue to find wide disagreement over the numbers characterizing our homeowners experience, despite the fact that we have repeatedly presented all our data to the TDI and offered to have independent third-party actuarial review, which they will not accept. Unfortunately, their interest is not so much in resolving this issue appropriately, but more in riding it until November.”
Hageman continued, “The TDI’s unrealistic demands leave Farmers unable to generate the revenue needed to survive. For every $1.00 in homeowner premiums Farmers has received this year, it has paid out approximately $2.50 in claims. No company can stay in business under those circumstances.
“While the TDI issued a letter to the media Monday announcing a proposed settlement with Farmers, it was without substance as it offered no real remedies to the issues the two organizations have been seeking to resolve. The TDI has not removed the same fundamentally unsound demands that will cause significant harm to the financial condition of the exchanges and we cannot accept that given our fiduciary responsibility to all policyholders,” said Hageman. “The TDI continues to assert the same charges regarding our rates and procedures that are wholly without merit.”
Farmers asserted that the type of homeowners insurance policy and the rates it uses today would allow the company to continue to serve Texas homeowners. It added that reverting to old rules and policies as demanded by the TDI, would simply ruin the Farmers business. Farmers losses in the homeowners insurance line of business in Texas alone during the past two and a half years are $1.3 billion. This includes a loss of $435 million through June of this year. “In the interest of preserving Farmers’ customers’ trust in the financial stability of the organization, it would be irresponsible for Farmers to continue to sustain losses of this magnitude,” said Hageman.
For the first six months of 2002, Texas represented 15 percent of Farmer total property & casualty premiums countrywide, yet it accounted for 43 percent of the total underwriting losses. Mold losses alone through the first half were more than $300 million, which was the total for 2001.
Although the legal actions by the Texas Department of Insurance currently makes it unfeasible for Farmers to offer renewal on Texas customer’s homeowners policies, Farmers will continue to provide Automobile, Umbrella, Flood, Commercial, Life insurance as well as financial services products to Texas customers. The non-renewal of Farmers’ property insurance policy will not affect other policies currently in effect for that customer. Farmers is currently seeking approval from the Texas Department of Insurance to allow it to continue all multiple policy discounts that may be in effect.
“We will continue to work diligently to resolve the problems facing the Texas homeowners market and hope that we can someday re-enter the homeowners insurance market in Texas,” said Hageman. “If a meaningful solution is offered, we would reverse this decision. In the meantime, Farmers agents will continue to provide full service to our customers while their policies remain in effect and we encourage our customers to contact their agent with any questions.”
Topics Texas Agribusiness Homeowners
Was this article valuable?
Here are more articles you may enjoy.
