Catching on – Mississippi Insurance Chief criticizes State Farm’s 45% coastal rate hike

Chaney, who has convinced some 40 new carriers to do business in the state over the past year and a half, told Insurance Journal that he doesn’t like State Farm’s unwillingness to write new coastal business, its storm deductible or its failure to offer mitigation credits.

How about that, sports fans? Looks like he caught it! (all he missed was State Farm backing off mitigation credits in Florida).  Read on – here’s the story from the Insurance Journal followed by a note to the Commissioner.

State Farm is looking to raise coastal homeowners insurance rates in Mississippi an average 45 percent but the state regulator isn’t very receptive to the idea.

“I am not going to approve the present filing,” Insurance Commissioner Mike Chaney stated flatly, claiming the filing is riddled with “serious issues.”

The proposed increases would be in the coastal counties of Hancock, Harrison and Jackson.

State Farm cut back on its business in the state after Hurricane Katrina. Last August, the company was granted an average 13.6 percent increase statewide. At that time, it also initiated a mandatory 5 percent deductible on all home policies that include wind coverage.

In January of this year, the company resumed writing some renters policies in the state and in June it allowed its agents to start writing some new homeowners policies, but none of this new business is along the coast.

A spokesman for State Farm said his company believes it has “worked well with Commissioner Chaney in the past” to resolve rate issues and it will in the future.

Chaney, who has convinced some 40 new carriers to do business in the state over the past year and a half, told Insurance Journal that he doesn’t like State Farm’s unwillingness to write new coastal business, its storm deductible or its failure to offer mitigation credits.

A word to the wise is in order – although borrowed. I believe it was David Rossmiller who pointed out one reason policy language such as anti-concurrent causation, slips in without notice is that state regulators focus on rate more than policy provisions.

One tip on possible “slippers” comes from Chip Merlin’s post quoted in z-SLABBED post:

I think nobody thought about how the “collapse” peril as an exception to the exclusions would apply to a hurricane with storm surge. I predict the ISO and other carriers writing their own standard forms will change the language in the future just to prevent policyholder attorneys from noting this claim to coverage.

Chip may very well be right; but, changes have to be approved.  Currently, consumers are cut out of the decision making process when changes in rates or policy language are proposed.  If and how he makes insurance regulation a public process will be the proof that’s in the pudding come 2012.

6 thoughts on “Catching on – Mississippi Insurance Chief criticizes State Farm’s 45% coastal rate hike”

  1. Mr Chaney was in bed with State Farm with that hit job on Cori and Kerri called a Market Conduct Exam. The MID employee who oversaw the study, Lee Harrell now works for a law firm in Jackson that does State Farm defense work.

    There is no reason to think he is not in bed with them now, which is precisely why the process in Mississippi, unlike that in Florida, is conducted out of the sunshine behind closed doors.

    These people have an anti trust exemption. There should be no secrecy in the process period. The portions of the rate up released to the public is a cookie cutter doc that I found duplicated on several state DOI websites. State Farm has been busy that way.

    Without full transparency on the weather modeling aspects of the rate app, none of the other numbers that result from their use can be trusted.


  2. oops, a belated h/t to Y’all for the link to the story. Sorry, just caught my “omission” (guess that’s contagious condition on blog about Katrina litigation)

  3. Sop: Mississippi’s own Insurance Commissioner in bed w/State Farm? No….I can’t imagine (ha, ha). Man oh man, what a disgrace. SO MANY PEOPLE of so many different professions have been (and remain) in bed w/State Farm!! It’s like they’re running a bordello or something.

    SO MANY PEOPLE have PROFITED (and probably arranged their retirement funds) as a result of the Hurricane Katrina CATASTROPHE; alot of these people return to their homes (non-Katrina states) and go on living after making this profit off people’s misery – it’s just another day in the park for them.

    But the sad fact remains that ALOT of peope were truly HURT, DISPLACED, HAD THEIR LIVES RUINED, their homes SLABBED, RELATIVES KILLED, etc., by Katrina and still have not been made “whole,” are still battling w/their insurance companies and yall’s lives will forever be reminded of this horrible tragedy. NOTHING (not even $) can ever give yall back what you lost!


  4. Did Mississippi’s risk increase by 45 percent since last year?
    Did Mississippi’s estimated losses over time increase by 45 percent since last year?
    The risk hasn’t changed. The only change from last year is State Farm’s investment losses.
    Remember this the next time the industry cries about not being allowed to charge “actuarial” rates. They want premiums to be much higher than what they expect to pay in claims.

  5. Its a tough market right now and many an insurer was caught flat footed asleep at the switch. I’m gonna stick a few old posts from the archives up on State Farm’s curious investment practices in its reinsurance program.


  6. Brian Martin gets it. Most people, even lawyers who practice in this specialty, don’t understand that the P & C insurance “industry” has little or nothing to do with actual risk transference and everything to do with making and keeping profits. The contractual promise, “risk transference,” is merely sales pretext. Insurance companies procure profits from customers by charging fees in return for ostensible risk transference. Rate filings are a way of making sure that the insurer’s profit margin stays one-step ahead, and is at all times, as much as possible, guaranteed. Unlike other lines of business that have to compete and win or lose profits based on their market performance, insurers are able to operate a business model that mandates an annual profit, and all this in spite of institutional fraud and abuse of their own customer base.

    The insurance scam is able to work b/c: (1) insurance is not voluntary, i.e., we are all legally or market compelled to buy it; (2) there’s only a pretense of regulatory oversight, (as evidenced by the preposterous notion of an insurer objectively “investigating” a claim, and all by itself deciding whether to diminish its profits by paying the claim); and (3) the corporate thieves running the industry are 100% antitrust exempt. Despite these conditions, Courts routinely permit insurers to operate what amounts to a de facto racketeering business: first, insurers sell a product disguised as a risk transference device; second, they stockpile the profits and through lobbyists and massive campaign funding, “purchase” legislators, insurance commissioners and elected judges who will best insure the scheme continues; finally, they use the customer’s own fees to defeat and undermine his right to benefit payment. Some might deny all this and argue: “that can’t be true . . . first, no one can stay in business in America by openly declaring war on its own customer base . . . and second, you make it sound like every risk transference is totally fake; if that were true insurers would never pay off, every common house fire would be routinely denied.” To the first point, the sad answer is yes you can abuse and defraud the customer base and still not suffer if the game is so legally rigged that it makes no difference how you conduct the business. Consider the practice of “whipsawing.” A catastrophe occurs. SF “messages” its customers through careful press releases, “if you continue to sue us, continue to press for payment on these catastrophe claims, we’ll grossly increase your premiums, drop your coverage upon renewal, or simply pull out of your market altogether.” (Of course it also doesn’t hurt to spend millions convincing flag waving lunatics, “pro-business” types with single digit IQ’s that lawyers are running up their insurance costs). Finally, I have to agree with the last point, somewhat. Not every risk transference device is a sham transaction. If it were, the model would probably fail. But, think of insurance like gambling (which it is), if you’re the “house” you must pay out occasionally, if for no other reason, than to convince the players the game is not rigged. The insurance industry is the house, and we’re the players. The difference is this: this game ain’t voluntary.

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