State Farm Hikes Rates Again & TDI Can’t Stop Them
Texas Watch—March 11th, 2010
AUSTIN – State Farm – the state’s largest insurance provider – has informed the state insurance department that the company plans to hike rates 4.5% beginning in May. This comes on the heels of an 8.8% increase last October and a $700 million giveaway to the company in November. There is nothing that state insurance regulators can do to stop the rate hike despite reservations expressed by Insurance Commissioner Mike Geeslin.
The Houston Chronicle reports that Commissioner Geeslin has sent a letter asking the company to reconsider the rate hike, saying that rate hikes so close together could lead to market instability. Geeslin also expressed concern that State Farm’s rate hike could embolden other insurers to increase their rates too. The insurance commissioner has no authority to stop an insurance company from raising its rates whenever it wants.
“All the insurance commissioner can do is ask State Farm to please not gouge Texas homeowners. He has no authority to block this or any other rate hike,” said Alex Winslow, executive director of Texas Watch, a citizens’ advocacy organization active on insurance issues. “The insurance commissioner shouldn’t have to beg the insurance industry for anything. Texans need protections from insurance industry price gouging. The current scheme allows the insurance companies to dictate the market without justifying their rates to anyone. In order to protect Texas homeowners, the insurance commissioner should be given the authority to effectively police the insurance industry by denying unwarranted rate hikes before they are imposed on Texas policyholders.”
Under Texas’ current regulatory scheme, known as “file and use,” insurers do not have to justify rates hikes before they are imposed on Texas homeowners. Currently, the insurance commissioner has no authority to block State Farm – or any insurer – from raising its rates whenever it wants. Consumer advocates and homeowners have long advocated for a “prior approval” system that gives the insurance commissioner the opportunity to approve or deny rate hikes before – not after – they are imposed on Texas policyholders.
More Information:
Texas Watch Memo to Legislators
Insurance Commissioner’s Letter to State Farm
Office of Public Insurance Counsel’s Objection to State Farm’s Rate Hike
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For Immediate Release
March 11, 2010
Contact:
Alex Winslow, 512-381-1111
