1.2M Texans Should Applaud The Texas Department of Insurance

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The Texas Department of Insurance brought up legal charges against State Farm in 2003, shortly after the Legislature passed a law outlining lower home insurance rate requirements. State Farm refused to acknowledge the law. For the five years following, State Farm brazenly overcharged Texas consumers $352.5 million in homeowner insurance premiums. Infamously litigious, the company dragged out a legal battle for over a decade.

In 2011, a state judge upheld the refund order. State Farm continued punting, delaying the inevitable, until last Friday. They’re paying that $352.5 million back because, according to spokesperson Patti Kelly, it “allows us to focus on serving our customers and move forward without additional expense and distraction of continued litigation.” Notably, State Farm has challenged only the legality/soundness of the rate reduction itself, and has not contested that it illegally broke that law. The consent order signed by all parties stated that State Farm “does not admit that its rates were excessive or unreasonable for any period of time, and enters into this consent order to settle all claims against it and to avoid the expense and uncertainty of continued litigation.”

In that light, it seems very strange that this pressured decision doesn’t come with a fine, and that’s probably a reason State Farm decided to get “ahead” of its fate…12 years too late. The rates were definitively excessive, knowingly outside the bounds of Texas law. State Farm also acted egregiously on top of their thievery: in one major appeal, State Farm argued that paying customers back their due would threaten its financial stability and thus they should be left off the hook. If that doesn’t show you their priorities, maybe this will via the Dallas Morning News:

A report from the insurance department last year indicated that State Farm had a very profitable year in 2013, after paying out just 40.2 percent of its premiums to cover property losses. The company’s “loss ratio” was better than the state average of 44.8 percent for the largest insurers and significantly better than the 60 percent loss ratio that is a benchmark for profitability in Texas.

It was anti-consumer money grubbing to the tune of millions, and it’s ugly. Texans with awareness and ability would do well ditching State Farm as soon as possible…not before collecting their due, though.


About Author

Ben Sherman

Ben Sherman has been a BOR staff writer since 2011. A graduate of the University of Texas, Ben has worked on campaigns, in political consulting, and has written for other news outlets like Think Progress. Ben considers campaign finance reform the fundamental challenge of our time because it distorts almost every other issue in American politics.

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