Mississippi Officials Give Cold Shoulder To AG Hood On Homeowners Proposal

Mississippi Attorney General Jim Hood's plan to tie auto insurance underwriting to property coverage got a lukewarm response from the governor and insurance commissioner, while being universally condemned by the industry.

Mr. Hood's proposal would force a carrier writing auto insurance in the state to provide homeowners and commercial coverage if they write those policies elsewhere in the United States. He said the plan mirrored similar legislation in Florida.

In response to State Farm's recent move to stop selling new homeowners policies in Mississippi to avoid additional catastrophe exposure, Mr. Hood accused the carrier of "punishing their own insurance agents in [non-coastal areas] who are innocent of anything, and they are punishing the state of Mississippi by making an example of us, and trying to intimidate a federal judge and our legislature..."

State Farm is the primary writer of homeowners insurance in Mississippi, with approximately 30 percent of the market. According to the National Underwriter/Highline Data Service, the carrier is number three in commercial policies with more than 8 percent of the market. It also leads with 26 percent of the state's private passenger auto market.

Mr. Hood called on Gov. Haley Barbour and Insurance Commissioner George Dale to take emergency measures to prevent State Farm from implementing its plan to stop writing new policies. He called the action a bullying tactic to intimidate the state into writing wind pool legislation.

He said the legislature should now look these "robber barons in the face" and not let the company take advantage of the situation.

State Farm's action only underscores the need for a national catastrophe plan and federal reform of the industry, he added.

"We feel this is a remarkable response to what was just purely a business decision, but it does underscore the legal and political challenge we face in Mississippi," said a State Farm representative. "State Farm is not trying to pick a fight. We are just trying to service our current customers and do not want to accept the additional risks new policies would pose..."

He added that the carrier "didn't come to this decision lightly, and we thought we struck the right balance between serving the interests of our current customers and not taking on additional risks in a state intent on re-writing contracts after the fact."

Over time, he said, "we hope the political and legal environment in Mississippi will improve so that we can return to writing new business on the homeowners and commercial side, but today's action showed just how unpredictable and untenable the current environment in Mississippi can be."

In a letter to Mr. Hood posted on Gov. Barbour's Web site, the governor said he had no emergency authority "to force a private company to sell its products in the state of Mississippi."

In an interview with NU, Mr. Dale said he spoke with Gov. Barbour, and that the department would keep on doing what it has been doing--encouraging companies to continue to do business in the state and new companies to enter, while urging State Farm not to go any further than they have in cessation of business.

As for Mr. Hood's plan, based on Florida's recent legislation, Mr. Dale said he did not believe Mississippi is ready to invest money into a wind-pool plan on the scale Florida has, nor subject policyholders to dramatic premium increases. "We are going to take it real slow on most of these issues," he said.

Insurance company associations condemned the idea.

"Our initial reaction is that spreading a bad idea that Florida has adopted will not solve what is happening in Mississippi," Neil Alldredge, vice president of state and regulatory affairs for the National Association of Mutual Insurance Companies, told NU. "They should be getting more companies into the state and not bullying the ones who are there. Consumers will ultimately be the losers in this."

June Holmes, interim CEO of the Property Casualty Insurers Association of America, said that Mr. Hood's proposal would "only undermine efforts to assure that all consumers in the state have access to homeowners insurance protection that fits their personal needs and budgets."

"At a time when responsible state leaders are taking measured steps to rebuild a competitive market, the attorney general is proposing a draconian approach that will reduce consumer choice for both homeowners and auto insurance policies," she said. "While such a measure may be attractive for short-term political gain, [it] will do nothing to make insurance more affordable or available to the citizens Mr. Hood represents."