?Disingenuous? spin

April 11, 2002

Consumers Union denounces State Farm?s new Texas homeowner?s insurance policy

Inman News Features

A property insurance affiliate of State Farm Insurance Cos. announced this week that it received approval from the Texas Department of Insurance to begin offering its Texas policyholders the same homeowner?s policy that is available to other State Farm policyholders nationwide.

But at least one consumer affairs powerhouse isn?t impressed by Dallas-based State Farm Lloyds? new initiative. Consumers Union promptly issued a scathing statement calling the insurer?s spin on its new Texas insurance policy "disingenuous."

Ron Dodd, SVP of State Farm's Texas zone, said the national policy gives policyholders "a greater degree of control in tailoring insurance coverage to meet their needs" and that regulatory approval was "a positive development for Texas policy holders."

The company said its existing policyholders in Texas will begin receiving notices in July that the new policy form will be implemented beginning with Sept. 1 renewals. Individual policyholders will face higher or lower premiums, depending on "their location within the state and their selections regarding mold, foundation and water loss coverages."

The existing Texas state-mandated homeowner?s insurance policy contains extensive coverage for those catastrophes with "no ability for the policyholder to eliminate any of those coverages," according to State Farm, while the company?s national policy "gives consumers the option of buying those coverages at an appropriate price or turning down those options and paying a lower price for their coverage."

Dodd said the new policy puts Texas homeowners on equal footing with State Farm policyholders in other states.

"The state's existing policy provides insurance coverage for items that in almost every other state are considered a property owner's maintenance responsibility," said Dodd. "As a result, the costs of those maintenance-type activities have been rolled into the prices that we all pay for homeowner?s insurance. State Farm's national policy gives our existing Texas customers the option of keeping these coverages at an appropriate price."

But the "Consumer Reports" publisher said Texas? largest homeowner?s insurer had "pulled a public relations gimmick by adopting a new homeowner?s insurance policy that offers reduced coverage and gives policyholders a one-time option to buy back needed coverage at unregulated rates."

Reggie James, director of Consumers Union?s southwest regional office, said the tactic was similar to "buying a box of cereal or laundry detergent that has been shrunk in size while the manufacturer claims to 'lower' its prices."

"State Farm has fulfilled its long-time wish of adopting a national policy for Texas that offers less bang for the buck," James said. "By doing so, it will considerably narrow its pool of unwanted customers who currently have coverage for damage from slow leaks or damage to slab foundations resulting from plumbing leaks,"

"It is disingenuous and transparent for State Farm to say they're expanding options and providing rate relief," James added.

Whether State Farm will add any new policyholders in Texas is an open question. The insurer ceased accepting new homeowner?s line customers in the state in September, and Dodd said the company still has "obstacles to overcome" before it will resume writing new business in Texas. The company said it incurred an underwriting loss of nearly $839 million last year, representing $1.84 in claim losses and expenses for every $1.00 of premium collected.

Copyright: Inman News Service

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