This is the fourth in a series of insurance myths, published by the consumer group Texas Watch.
We’ve all heard the jingle: “Like a good neighbor, State Farm is there.” For over 11,000 homeowners policyholders in five counties along the Texas coast, nothing could be further from the truth. The state’s largest carrier has made the decision to pull up stakes and abandon these customers, many of them long-time and loyal, without even giving a rationale for their abrupt actions.
State Farm’s reckless actions are a man-made catastrophe, sending shock waves through the families and businesses along the coast, who will likely see their insurance costs rise as a result of State Farm’s actions. This disruption to the market will place unexpected pressure on other carriers and will ultimately relegate many coastal policyholders to the Texas FAIR Plan, a state-run provider of last resort that offers bare bones coverage at high prices.
To take their disloyalty to an even greater degree, the company is selling out many of its own insurance agents, who will see their customer bases scattered to the wind due to State Farm’s arbitrary and capricious corporate edicts. These small businessmen and businesswomen have spent years prospecting for clients and building relationships with policyholders; however, more than 11,000 of these policyholders are being forced to take their business elsewhere. Because policyholders receive discounts for having multiple lines of insurance with one carrier – for example, coupling a homeowners and an auto policy together – these customers will be walking out the door.
Because our laws and lending practices require us to buy insurance, it is important that regulators protect the public by ensuring policies are adequate, affordable, and available. Sound public policy demands that the insurance industry not be able to redline or cherry-pick parts of our state. Unfortunately, the Insurance Commissioner – who has shown little willingness to stand up to insurance giants like State Farm in the past – has been unable or unwilling to intervene on behalf of State Farm’s customers in this case.
The Attorney General, however, recently announced that he is launching an investigation into State Farm’s withdrawal. Instead of complying with the AG’s Civil Investigative Demands, State Farm filed a lawsuit against the state. It is unclear what this investigation will reveal, but it is important that the AG see this investigation through to the end. State Farm shouldn’t be allowed to tuck tail and run without any explanation. The public deserves to know just what State Farm is up to and how the company’s decisions will impact the cost and availability of insurance.
State Farm’s actions in this case highlight the fact that insurance companies don’t reciprocate the loyalty they expect from their customers. Right now, 11,000 State Farm customers in five Texas counties are learning that firsthand. Could your community be on the insurance industry’s chopping block next?
All of this leads Texas families and businesses to ask: With “neighbors” like these, who needs enemies?