Farmers Insurance Leaving Texas

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Farmers Insurance Leaving Texas

Wed Sep 25, 8:05 PM ET

By NATALIE GOTT, Associated Press Writer

AUSTIN, Texas (AP) - Farmers Insurance Co., the state's second largest

homeowner insurer and the target of a state lawsuit, is leaving the Texas

homeowners' market and will stop renewing policies in November, a spokesman

said Wednesday.

The company contends it is losing hundreds of millions of dollars in Texas

in part because of an upsurge in claims for mold and water damage. The

decision to pull out of the Texas market will affect about 700,000

customers, the company said.

The state sued Farmers in August, accusing it of charging customers too much

and engaging in deceptive trade practices. A week later, the insurance

department issued a cease-and-desist order against Farmers, telling the

company to stop what it called unfair pricing practices. The state also said

it would seek about $150 million in restitution from Farmers customers.

State officials offered to settle the cease-and-desist order this week if

Farmers agreed to change the way it prices policies and pay restitution, and

the insurance department said it would waive proposed penalties that could

have totaled billions of dollars.

But Farmers, which has denied any wrongdoing, said the conditions ordered by

the state Department of Insurance would not allow the company to generate

the money it needs to survive.

" We have made every attempt to continue offering homeowners insurance to the

people of Texas and we take this action with deep regret, " said

Hageman, Texas State Executive Director for Farmers. " We find the grounds

for the Department of Insurance's recent legal actions to be without merit. "

The Department of Insurance said it hoped Farmers would rethink its decision

but said it would not allow Farmers to do business illegally in Texas.

" We will not let Farmers use its sizable market share to intimidate us, "

said Executive Deputy Commissioner Karina Casari. Farmers issues about 20

percent of the homeowners insurance policies in Texas.

" It became clear during the past few days that Farmers had no intention of

complying with the law or treating their customers and agents fairly and

honestly, " she said.

Homeowners insurance rates have increased for some Texas consumers by as

much as 200 percent. Insurance companies say the higher premiums stem from

the rising cost of water-related and mold-related claims, among other

factors.

Farmers said Texas accounted for 43 percent of its total underwriting losses

in the first half of this year, even though only about 15 percent of its

property and casualty premiums came from the state.

Insurance has become the key issue in the gubernatorial race that pits

Republican Gov. Rick against Democrat Tony .

said Wednesday he wants Farmers to do business in Texas but added,

" The consumers have been getting ripped off by this company and I'm not

going to put up with it. " , meanwhile, charged that Farmers'

withdrawal could have been avoided if had not mismanaged the oversight

of insurance companies and had acted sooner to solve insurance problems.

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On the Net:

http://www.tdi.state.tx.us

http://www.farmers.com