No additional comment is necessary about this editorial from the Dallas Morning News today:
State Farm is masterful at working the legal system. For six years, it has danced in and out of court to thwart the Texas insurance department’s order to refund millions to policyholders in alleged overcharges.
State Farm says it has done nothing wrong and owes nothing. However, the Office of Public Insurance Counsel, a state-funded advocate for consumers, pegs the refund at about $1 billion. The state insurance department’s staff, whose commissioner, Mike Geeslin, eventually will decide who’s right, puts the cost at $350 million.
Consumers are right to find this galling. State Farm collects premiums and conducts business as usual while policyholders continue to wait for expected refunds.
One wonders whether there is any real accountability for a big insurance company when its rates are called into question. Before insurance reform a few years ago, insurers complained of lengthy regulator reviews that prevented them from charging new rates in a timely fashion. So lawmakers loosened the reins and set up an appeals system that they thought insurers would accept in good faith. Instead, the result is marathon stonewalling.
State Farm’s action is a blatant challenge to the state’s authority to regulate rates. If the company prevails, no other major insurer whose rates are called into question will ever again settle outside a courtroom. For instance, Farmers Insurance recently filed for a rate hike. Anyone believe that if its rate request is rejected, Farmers will roll over quietly?
Gov. Rick Perry is expected to call lawmakers back into a special session to decide the future of the Texas Department of Insurance, which wasn’t reauthorized during the just-completed regular session. In addition to that work, lawmakers should fix this unfair review process.
State Farm policyholders certainly are free to take their business elsewhere, which could do more to promote insurance competition than any measure regulators would demand. But shopping around now doesn’t provide those policyholders with satisfaction or refunds.
This is a mockery, and it must end.
