Farmers Insurance Company’s troubles in Texas mounted with an August 13 emergency cease and desist order issued against Farmers by the Texas Department of Insurance in an effort to “stop unfair pricing practices” by the company. Farmers responded by directing its agents to discontinue selling new homeowners policies in Texas beginning Oct. 31. The company will also stop offering replacement policies, existing policies that are not renewed during the renewal period.
The TDI order prevents Farmers from initiating any additional rate increases and gives the company 90 days to develop and implement a new corrective plan to remedy what TDI believes to be its unfair pricing practices. TDI plans to seek restitution for Farmers customers who are found to have been overcharged.
“This cease and desist order is a necessary step to stop unfair and illegal activity by Farmers Insurance,” stated Commissioner of Insurance Jose Montemayor. “Farmers’ own actions have forced this extraordinary step. TDI will allow them time to develop a remedy but we will not allow Farmers’ illegal actions to continue.”
On Aug. 5 Texas Attorney General John Cornyn filed a lawsuit against the company alleging that Farmers Group violated state law with deceptive, misleading and discriminatory practices in the homeowners insurance market. After reviewing the charges, Farmers issued a statement saying it has not violated any laws in the state and that the allegations are “without merit.”
The suit alleges Farmers violated the Texas Insurance Code and the Deceptive Trade Practices Act on a number of counts. The attorney general said it resulted from the discovery of illegal practices by Farmers during “an investigation initiated by the Attorney General’s Consumer Protection Division and during an examination by the Texas Department of Insurance.”
Negating Farmers’ claims that the company is losing money in Texas, the lawsuit states: “Although Farmers claims its losses require it to raise premiums and reduce coverage for Texas policy holders, Farmers Group is making—not losing—money!”
However, Farmers insists that it is losing a battle, monetarily, in Texas and that it is serving the state in a fair manner. In a statement responding to the lawsuit, John Hageman, executive officer of Farmers’ Texas operations, noted that the company had lost nearly $400 million in the Texas homeowners market through May of this year and about half a billion dollars in 2001.
Farmers spokesperson Bill Miller said the company wants to continue to do homeowners business in Texas and is working with TDI to resolve the outstanding issues. A company memo to agents reinforced that sentiment, stating: “We want to find a way forward and are in serious discussion with the appropriate parties.” The memo added: “it is Farmers desire to do everything within reason to remain in the Texas Homeowners market.”
Farmers stopped offering new comprehensive HO-B policies in the state last August but has since been selling HO-A and HO-A plus policies to new and existing customers. Insurance Journal has previously written, erroneously, that the company had ceased writing all new homeowners policies in the state as of August 2001.
Topics Texas Agribusiness Homeowners
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