Texas, Farmers Agree On Rate Cuts ForHomeowners

The Texas Department of Insurance and Los Angeles-based FarmersInsurance Group have reached an agreement on rate reductions thatcaps a more than year-long war of nerves over a troubled homeownersmarket.

Texas Insurance Commissioner Jose Montemayor said the agreementcalls for rate cuts of 5 percent for all current and newpolicyholders, and freezes any increases for at least 18months.

Also, all existing Farmers policyholders who renew theirpolicies will receive an additional 15 percent off the alreadylowered rate. In addition, all policyholders will be offeredincreased water damage coverageup to 50 percent of their policylimitsat no additional rate increase.

“Farmers policyholders will finally see the rate relief theydeserve,” Mr. Montemayor said.

However, the deal stirred the ire of some consumerrepresentatives. Birny Birnbaum, director of the Center forEconomic Justice, called on Texas Gov. Rick Perry to replace Mr.Montemayor immediately in the wake of the deal.

“We are shocked that Mr. Montemayor let Farmers completely offthe hook for the premium overcharges over the last 15 months,” Mr.Birnbaum said. “Not one penny to consumers who paid hundreds ofmillions of dollars in excessive premiums.”

In September of last year the department upheld its own order ofrate reductions of 12 percent for State Farm, the top homeownerswriter, and 17.5 percent for Farmers, the states number-twowriter.

The commissioner ordered the reductions last year under newauthority granted by the legislature aimed at bringing stability tothe homeowners market, which had been hit by rising prices stemmingin part from mold litigation.

State Farm remains the sole holdout in the appeals processfollowing the Farmers settlement.

“This agreement avoids a very real potential of an extendedlegal battle and provides rate reduction for a substantial portionof the Texas homeowners market,” Mr. Montemayor said.

Farmers executive director for Texas, John Hageman, said asignificant reduction in water and mold-related claims permittedthe rate reduction.

Reproduced from National Underwriter Edition, December 16, 2004.Copyright 2004 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.