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Farmers Insurance playing hardball with Texas

By Maxine Shapiro, KERA 90.1 business commentator

Dallas, TX – Here's a scenario that should be working in reverse. An insurance company is holding the State of Texas hostage. I'm Maxine Shapiro with KERA Marketplace Middays.

You might remember back on August 13th, the Texas Department of Insurance ordered Farmers Insurance Group to halt pricing practices that unfairly overcharged hundreds of thousands of homeowners for insurance policies. The state is seeking $150 million plus penalties of up to $25,000 for each policy-holder that was overcharged. The state attorney general making filed a lawsuit August 5th, making some of the same allegations. The Insurance Department mandate gave Farmers 90 days to change its rate setting practices or be subject to higher penalties.

So this weekend, the Austin American-Statesman reports that Farmers is preparing to pull out of the homeowners' insurance market in Texas altogether. One day after Farmers' CEO Marty Feinstein's conference call with his district managers, the Insurance Department on Friday was being "bombarded" with call from agents accusing the State of "running them out of business." Spokesman for the Department Robert Black in an obvious defensive statement says, "The only thing we've asked (Farmers Insurance) to do is obey the law."

If in fact Farmers does stop writing homeowner insurance policies, 20% of the states homeowners would be scrambling for new insurance. Executive Director Dan Lambe of Texas Watch, a consumer advocacy and research organization, told me this morning that there are laws that call for insurance companies, who want to pull out of Texas, to do so in an orderly fashion giving proper notice to the state and to their customers. The problem, as Lambe sees it - the attorney general's office is too lax in enforcing the laws relating to insurance companies. This cheap threat by Farmers might be just that. Insurance Department Spokesperson Mark Hanna told me he expects Farmers to stay and abide by the laws.

But whatever happens, our representatives down at the Capitol better get a tighter grip on this reign, identifying who's governing whom. For KERA Marketplace Middays, I'm Maxine Shapiro.

Marketplace Midday Reports air on KERA 90.1 Monday - Friday at 1:04 p.m. To contact Maxine Shapiro, please send emails to mshapiro@kera.org.