State Farm to stop writing new commercial and homeowner policies in Mississippi

[Doondoo]

State Farm Insurance Cos. is suspending sales of any new commercial or homeowner policies in Mississippi starting Friday, citing in part a wave of litigation it has faced since Hurricane Katrina, a company official said Wednesday.

Mike Fernandez, vice president of public affairs for State Farm, said Mississippi's "current legal and political environment is simply untenable. We're just not in a position to accept any additional risk in this homeowners' market."

.......

"I view this decision as the inevitable outcome of the increased uncertainty and cost associated with the litigation that has developed post-Katrina," said Robert Hartwig, vice president and chief economist for the Insurance Information Institute in New York, an industry-funded group.

The state's courts and some state officials have created a "virtually impossible working environment for insurers," he said.

Mississippi Insurance Commissioner George Dale said State Farm's decision comes at a time in the recovery process when "it is becoming more vital than ever that policyholders in Mississippi have a viable and affordable insurance market."

"State Farm's decision is a stark reminder that the issues brought about by Hurricane Katrina affect not only the coast, but policyholders all across the state," Dale said in a statement.


http://updates.blogs.nola.com/default.asp?item=491238

[Gman]

1. State Farm likes being the house in the insurance gambling game

they just don't like to lose. They're always supposed to win, no matter what. So now the "legal and political climate" means they have to pay up because they lost, they decide they don't want to play anymore. People in MS don't have the choice of not playing the gamble of life.

[AirmensMom]

2. What ...

they might actually have to PAY if something happens? :wow: Perish the thought!

Maybe if they just paid the damn claims, they wouldn't be faced with litigation. What has created a "virtually impossible working environment for insurers" is that insurance companies got so used to collecting premiums and not having to pay out. Things are a little different now and they all want to take their toys and go home. What a crock insurance is! :grr: :mad:

[Somawas]

6. Totally agreed.

Insurance is a crock. And the Mississipi cases demonstrate, in my view, how allowing state regualtion of the industry simply spreads the graft and corruption around, while allowing the industry to write most of its own rules.

[Telly Savalas]

9. If insurance is a crock, then isn't it good news that State Farm

won't be peddling their snake oil in Mississippi anymore?

[geomon666]

8. It's a total scam.

Oh you mean I get to collect money for decades and only once in a while have to pay out and even then not really?

You've got to admit that's a wonderful scam. They just get to collect money.

[agtcovert]

3. I've seen several stories about this...

You have to wonder who's doing the math...I don't think it takes a genius to figure out it's cheaper just to pay up and move on. What did they think would happen?

I'm also wondering if anyone has found a company that's not acting like an asshole? I don't really want to keep my policies with State Farm anymore--maybe they'll decide not to pay me if/when I need them.

[Maeve]

4. Unlike a good neighbor, State Farm is OUTTA there! eom

[gratuitous]

5. An impossible working environment for insurers

After all, insurers are in the business of collecting premiums, not paying claims.

[acmavm]

7. This kind of nonsense is why I don't understand why gambling

isn't legal. Because that's all you're doing when you buy insurance. You're betting that you'll be struck by disaster (illness, car wreck, flood, tornado, hurricane, etc.) and the insurance is putting their money on the hope that they don't have to pay out. Notice I didn't say that they're betting that you don't get hit with a disaster. They're just betting that they don't have to pay (one way or another). Believe me, I used to be a claims examiner. I didn't last six months.

[Trillo]

10. It's curious that an Insurance Co. has the FREEDOM to make this decision.

If a homeowner has a mortgage, they're not given equivalent FREEDOM to say, "No", I do not wish to purchase Homeowner's insurance.

The lender makes the decision. The lender has the FREEDOM to say the homeowner must have insurance, but not the homeowner.

If the lender has FREEDOM, and the insurance seller has FREEDOM, why is it that the homeowner does not have equivalent freedom? Among other problems this creates is the necessity for the homeowner to 'jump through hoops' and find a new insurance company in the event that the insurance isn't renewed by the company. What happens then if no insurance companies offer it, or it's only available at rates that are unreasonable? Too bad, gotta buy it or else the mortgage company will buy it for you and charge you, and they don't care how much it costs.

Isn't our system of FREEDOM grand?

Perhaps this is an area that needs more regulation. Perhaps the freedom of these companies to decide when and where they are allowed to not renew insurance needs to be restricted. Perhaps, once they've decided to take a risk and sell insurance, that insurance policy needs to be for a guaranteed length of time that matches the mortgage length.

Perhaps in turn, the Insurance companies will need Bankruptcy Insurance that protects their clients in the event the company throws up its hands and says, ""virtually impossible working environment for insurers," and they don't want to stay in the biz. In that event, the Bankruptcy Insurance in turn could bail out the homeowners who thought they'd bought insurance for the length of their mortgage.

It seems only fair.

[northzax]

19. you are correct

the owner of the property has the right to decide about insurance. And when you have a mortgage, you give up that right to help guarantee the loan. You think I am going to loan you $250,000 on an asset that might be destroyed, and not require insurance? same thing with a car loan, you know you don't actually own the car until it is paid off, right? the bank does- and they want insurance, so as a condition of the loan they make you carry it. You can always go find another lender, if you'd like.

don't like it? don't borrow money from them.

[jaybeat]

20. Yes, but you can't have it both ways

If you are willing to lend me money to buy something, you have the right to require that I buy insurance.

But now I have an responsibility to buy insurance (to protect your interest in the property), but I don't have the *right* to buy that insurance? If I can't get it, then you can't require that I get it! And if that means you don't loan me the money, and that means that I don't buy the house, then all of a sudden the private interests of the insurance companies and the banks are in conflict with everybody else's interest of being able to live in houses.

And doesn't it say somewhere that we're supposed to have a government that provides for the, er, *common* good?

I *know* I read that *somewhere*...

[northzax]

24. if that continues to be a problem

one of two things will happen:

a: another insurance company will enter the market to make money
b: lenders will find other ways to insure their loans

[PassingFair]

32. Third scenario:

People who cannot afford astronomical "pool" insurance
will just have to leave.

Brilliant!

[Trillo]

22. Are the laws for the minority or majority?

One question is who is the property owner, the person with responsibility? And who gets to make such decisions.

Yes, when a purchaser buys a piece of property, it is usually, but not always, with a fixed rate, this is so their monthly payments are fixed. The mortgage company has a right to insure their collateral is insured.

However, your phrase "You think I am going to loan you $250,000 on an asset that might be destroyed, and not require insurance?", given that I clearly stated that insurance should perhaps be priced and sold for an equivalent period of time to match the homeowners mortgage time-length, is clearly an effort to spin the disparity of differing time increments, when the current disparity is not favorable to the home purchaser who has an interest to have a fixed monthly payout amount. Property ownership is beneficial to workers and their future 'elder' years.

Otherwise, there is no point in buying any place to live. Just rent and be subject the fluctuating vagaries of the market, which is generally upward over long time periods. Where elderly people may then be able to afford to live becomes quite an issue, given that those years are generally marked by declining monthly incomes and at some point.

Your concluding point of "don't like it? don't borrow money from them" goes to whether our legislators are for the interest of the majority of citizens, or the interests of huge corporations. In this case, you are suggesting that legislators should solely be concerned with the interests of the rich who can afford to pay cash for a home. Unfortunately, the reality is that most people and U.S. citizens can only buy on a payment plan. So, are the laws for a minority of corporations and wealthy people, or a majority of working citizens?

[KamaAina]

11. So, let me see if I've got this straight...

...it wouldn't be legal for them to redline just the three counties that are on the Gulf Coast, but it apparently is legal for them to redline the whole doggone state, including inland regions where a "hurricane" is a drink you get when you go to New Orleans for the weekend. Criminetly.

Wonder what their political donations look like. This definitely seems like a move from the repuke playbook: you lose a court case, so you take your marbles and go home. :nopity:

[Marrah_G]

15. They are under no obligation to offer services in every state

Each state regulates how insurance companies operate within their state. Like any business they are not required to oprate in every state, they are only required to operate within the guidelines of any state they choose to do business in.

[Solo_in_MD]

34. Key point...

Additionally many insurance companines are actually a lot of smaller insurance companies (1 per state) to help with that compliance. In that case, the Alabama comapny can not get funds from the Montana company.

[Vinca]

12. This is why something has to be done about the insurance industry.

Whether it's health insurance or house insurance, they've taken the "risk" out of their business to ensure megaprofits.

[David Dunham]

13. No one in Miss. will get mortgages without homeowners insurance.

[hatrack]

14. And who do you think will step in to fill State Farm's shoes?

If you said "We The People" - pass Go AND pay $200!!!!

Can't let those Mississippi realtors and developers go jobless, now can we?

[Marrah_G]

16. There are other Insurance companies

They are only hurting themselves, people will get coverage elsewhere and Statewide's reputation is forever tarnished.

[bluedog]

17. if it turns out like Fl..good luck!

we have insurers pulling out left and right......I have had 3 in the past 2 years..........The only place left for most of us is Citizens of Florida....the state run last resort..............this is going to happen on all coast lines......we the people are stuck and paying up the a** many are moving and the ones who have homes paid off...are dropping insurance.......these companies have a racket ......

[jhasp]

18. Not to be mean but....

is this a bad thing that insurers are pulling out of places that are prone to natural disasters. Should you really live in a place if you can't afford a dwelling that will stand up to the expected natural disasters that will occur?

[jaybeat]

21. What's mean is allowing development in unsafe places

The developers make their money and then move on. The homeowners buy 'cause they can afford to. When their gamble ends badly, the ones who made the money, the developers and the banks and the insurance companies, suffer no loss at all. But if you want to rebuild, they'll gladly take your money to do so!

It's like selling rancid meat at half-price. Sure, you might be starving and can't afford the "safe" stuff, but hey, we just sell it. It's your own fault if you get sick!

[Solon]

23. Where do you draw the line though?

There is no "safe" place in this country. In the Midwest you have tornadoes, along with ice storms, hail, etc. In the Northeast, you have Hurricanes(yeah, it happens), Nor'easters, etc. Along the Gulf and most of the Southeastern Coast you have Hurricanes and tropical storms. And on the west coast, you have volcanoes and earthquakes. In Hawaii you have volcanoes and tropical storms, in Alaska, severe winter storms, etc.

In ALL of the lower 48 you have wildfires as well.

Besides, here's a little known fact, out of ALL disasters, there is ONE that, above any other, insurance companies pay the most for, at least in property damage, and that is hail, which also pretty much affects most of the nation, but has a corridor though Texas north to Nebraska.

[Solo_in_MD]

35. Most insurance companies are state based due to regulations

and are not in a position to form a true nationwide pool. Thank local regulators for that...

[LafayetteTGR]

28. It is not that easy

I live in southern Louisiana. My father was raised in a very poor community where most of the men are uneducated so they crawfish for a living. Until these last two hurricanes, the natural disasters have been far and in between. These people live lower class lifestyles, but have homes or trailers that they have been paying insurance on for years. You can't just come into a community like that and tell these people that they have to move elsewhere because the insurance companies didn't make enough money on them this year. Where would they go and what would they do? It wasn't their choice to be born and raised down here and they can't just hop the next plane to another city and start up a new life. For most of them, they only know southern Louisiana and their community is a family. Plus, they provide goods for the seafood market. How would the seafood market suffer if we didn't have people who crawfished and shrimped for a living? Besides, like the poster below pointed out, this time it is the gulf coast. What happens the next time an earthquake hits southern California? Are we going to tell the people of Los Angeles to move to the midwest? What happens when the midwest have a season of severe tornadoes? Where is a "safe" place to live so insurance companies can continue to rake in billions of dollars for doing nothing?

[sarcasmo]

25. I Recommended this because this Industry needs to be shown for the Crooks

they are.

[Autobot77]

26. I'm glad I don't have State Farm anymore

EOM

[Eugene]

27. AP: Miss. AG Seeks Legislation on State Farm

Associated Press
Miss. AG Seeks Legislation on State Farm
Associated Press 02.16.07, 1:00 PM ET

Mississippi Attorney General Jim Hood said Friday he will seek legislation aimed at
blocking State Farm Insurance Cos. from refusing to write new homeowners and
commercial policies in the hurricane-battered state.

He said the plan was modeled after actions taken by Florida and would require any
company that writes automobile insurance to write homeowners policies as well.

"We're looking at a robber baron in the face that is trying to make an example
of Mississippi," Hood said of State Farm.

-snip-

Full article: http://www.forbes.com/feeds/ap/2007/02/16/ap3434568.html

[Solo_in_MD]

36. Be interesting to see if he can since they may be seperate companies

[sakabatou]

29. Like a bad neighbor, State Farm doesn't care

[Catherine Vincent]

30. The insurance companies did it in Texas too.

When Tropical Storm Alison hit Houston, there was an abundance of mold claims. One insurance company (I think Farmers) stopped accepting new policyholders because of it. And now most insurance companies will not insure your home for mold. Sigh!

[tammywammy]

37. Not only that

but when I moved into this apartment 2 years ago, I had to sign a form about mold...basically that it was my problem if mold formed and I have no recourse with the complex.

[4dsc]

31. Corporate blackmail

plain and simple.. I would encourage anyone with State Farm to find another carriers..

[GoddessOfGuinness]

33. I'm confused...

If State Farm can't afford to pay more claims, isn't it a good thing that they aren't writing new policies?

I agree with much that has been said here with regard to insurance companies taking the cheap route on payouts for existing policies. But it seems like this is a step in the right direction. If State Farm doesn't have money to insure any more people, then it's up to other companies to fill the need.