POA Pushes Texas Anti-Cherry Picking Bill

Policyholders of America (POA), a consumer interest group, announced it has secured enough support from Texas legislators to initiate the drafting of nine insurance-related bills to be considered in the 2003 legislative session. One proposed bill, an anti-cherry picking measure, would allow an insurance company to abandon the less profitable homeowners market if and only if the insurer withdraws from the state in its entirety, meaning a withdrawal from more lucrative auto, commercial, life, liability, health and other lines.

The POA noted that this proposed legislation, if passed, would put a stop to the ongoing threats of market withdrawal now being lobbed at regulators by insurance carriers. Additionally, it would make homeowner’s insurance more available and affordable in Texas.

Farmers Insurance announced it would stop writing homeowners insurance in Texas beginning Nov. 1. According to the POA, such a tactic is one of a playground bully and one that the people of Texas should not have to tolerate.

Many insurance companies, including Farmers, have cited a surge mold and water damage claims in Texas as one reason for their need to limit homeowners coverage in the state. The POA maintains, however, that despite insurers’ claims to the contrary the number of mold related claims filed in Texas in 2002 has plummeted to only a fraction of those filed in 2001. It added that according to A.M. Best, insurers are now touting their profitability because of fewer catastrophic losses and stricter underwriting guidelines.

The POA stated it maintains data on insurance claims where the insurance company commits bad faith and fraud. According to its database of more than 20,000 claims, Farmers or one if its wholly-owned companies, is represented in 63 percent of the cases where the insurance company is accused of committing fraud and/or bad faith against its customer. The consumer group said that nationally Farmers has about a 7 percent market share so theoretically, it should only be represented in the POA database by 7 percent. It added that the fact that the company’s representation is nearly 1000 percent more than their market share demonstrates a systemic problem.