NU Online News Service, June 1, 3:55p.m. EDT
State Farm Insurance requests to hike Texas homeowners rates by over 13 percent have sparked an extended battle with the Texas Department of Insurance, which called the proposed hikes "excessive."
Kevin Davis, spokesperson for State Farm Lloyd's, a Texas subsidiary, explained, "Prior to June of 2008 we had been unable to change our base rate for more than four years. During that time, the costs of everything related to insurance increased.
"As costs related to homeowners insurance continue to rise, our prices have to be adjusted to manage those trends. Like any business, our prices have to reflect our costs."
Mr. Davis added that the company balanced the need to "set responsible rates with our desire to offer competitively priced products and services."
Jerry Hagins, spokesperson for the Texas department told NU Online News Service that other insurers in Texas are not raising rates to the same extent as State Farm.
He said that State Farm's most recent rate filings were for 8.8 percent, effective Sept. 1 and another for 4.5 percent, effective May 1.
"They're both under review by our actuaries, so we do have the authority to disapprove them or order refunds if we need to," he said. "Any rate filing we get is reviewed."
If a rate filing of any company is disapproved before the effective date it does not become effective, he said. If disapproved after the effective date, the department could order a refund.
Mr. Hagins added that it is "unusual to have two rate filings so close together, they are among the highest we've seen."
He also said the department has been embroiled in legal battles with State Farm since early 2004. In one case, Texas ordered a rate reduction that was challenged in court by State Farm, which "never made the reduction," Mr. Hagins said. "That case has bounced around quite a bit."
Currently, he said, Texas has issued State Farm an order to refund $310 million to consumers, which State Farm is appealing.
State Farm's Mr. Davis responded that in 2003 there was an order for State Farm Lloyd's from the department to roll back its rates by 12 percent. He said a court found that ruling to be unconstitutional and ruled it void and unenforceable.
He said the case was remanded back to the Texas DOI to be done over. In 2009, he said the case was heard anew to conclude whether a refund was necessary and how it would be implemented.
"Our position has not changed, that our rates have always been reasonable and justified," he said.
A new development for the department, Mr. Hagins said, has been to put State Farm's rate filing on the department's website, along with an application allowing policyholders to determine the impact a higher rate would have on their premium.
He said the department also has tried to convey to consumers that "You don't have to stay with a company that is raising your rates."
To help consumers make informed decisions, he said a relatively new website, www.helpinsure.com, has been erected as a shopping tool, allowing consumers to type in a zip code and answer a few questions to bring up sample prices from insurers. It also compares auto insurance rates.
"It makes comparison shopping very easy," he said. "Our statutory role is to regulate rates, but we also need consumers to be informed and to vote with their feet."
He said the website, a Legislative mandate, also will contain financial ratings for insurers, a compliance ratio, and insurers' records of raising rates.
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