Delaware’s insurance department announced it has fined State Farm Fire and Casualty Company a $150,000 penalty for failing to include in some of its non-renewal notices a written explanation of the specific reasons for non-renewal.
The insurer has also been ordered to review its protocols regarding the application of underwriting guidelines for Delaware’s coastal region and adjust the language included in non-renewal notices.
Following State Farm’s decision to not renew 509 of its more than 127,000 property policies in Delaware, the insurance department conducted a market conduct examination to ensure the insurer was acting within Delaware insurance laws and regulations related to property insurance under Title 18 Insurance Code, Chapter 41.
The examination determined there was no unfair discrimination in State Farm’s underwriting decisions. However, the report did find that the non-renewal notices did not contain all the statutorily required information for consumers.
Delaware regulators said State Farm Fire and Casualty Company has also been ordered to suspend coastal non-renewals for a period of 3 years (starting November 1, 2012) and include additional information on future coastal non-renewal notices.
Under an agreement between the Delaware insurance department and State Farm, the company will:
• review its procedures to ensure that the cancellation or non-renewal notice contains information advising the insured that the insured may file a written complaint about the cancellation with the insurance department,
• review its procedures to ensure the specific reason for non-renewal is provided on non-renewal notices,
• review its procedures regarding accepting and writing new business that may be contrary to its established underwriting guidelines, and
• review its procedures regarding maintaining correct and complete property addresses to ensure underwriting decisions based on location are applied fairly and consistently.
“We take our responsibilities to Delaware customers very seriously. Along with our responsibility to help our customers manage the risks of everyday life, we also have an obligation to provide timely information on non-renewals, including the reasons behind our business decisions that impact our policyholders, and their options while facing a non-renewal,” said State Farm spokesperson Anna Bryant.
“We worked with the Delaware Department of Insurance during this examination and reached an outcome that protects Delaware consumers and allows State Farm to manage its business effectively.”
The Delaware insurance department’s market conduct examination covered the experience period from January 2009 to November 2011, and included a review of complaint handling, non-renewal practices, new business issued and in-force business.
Source: The Delaware Department of Insurance