State Farm: No more home insurance
By By William F. West / community editor
Nov. 13, 2002
State Farm Fire and Casualty Co., the largest insurer of Mississippi residents, will stop writing new homeowner policies in the state.
Company officials cite $111 million in losses in their decision to pull back the reins in Mississippi including $50 million in 2001 alone.
Webb Howell, State Farm's vice president for Mississippi, said in a statement Tuesday that the decision is a carefully measured response to the business environment and the risk the company has accepted.
State Insurance Commissioner George Dale said he received word of State Farm's decision on Nov. 5.
Dale said State Farm officials told him it would take a 44 percent rate increase to continue writing policies in the state. The company has to file a request for an increase and the state would have 30 days to respond.
The request comes at a time when other homeowner insurers have either pulled out of Mississippi, cut back their business or are asking for large rate increases.
Dale said he is negotiating with the insurance companies concerned, and reports some success in getting them to present lower requests for rate increases.
Dale said the problem is not limited to Mississippi. Similar situations, he said, exist in other Southern states.
He said the problem is two-fold.
U.S. insurance companies must have their own insurance for massive losses they would be unable to cover, so they look to the larger, global insurers for backing. The problem, Dale said, is the international insurers have been concerned since 9-11 and want more money from U.S. insurers.
U.S. insurers have also long relied on other investments, including the stock market, to boost reserves but such strategies do not work well in a bear market.
Dale said he does not believe the situation is directly related to Mississippi's tort reform situation.
However, state Sen. Terry Burton, D-Newton, said he believes there is concern about losing money in Mississippi's legal climate.
Of State Farm's decision, he said: "I think it is, either directly or indirectly, related to the need for tort reform in Mississippi not only for medical malpractice, but for business and industry and individuals as well."
Business and industry officials in Mississippi want limits on damage awards because they believe jury verdicts have gotten outrageously high. Mississippi's trial lawyers oppose attempts to change the current system.
State Insurance Department records show State Farm has 31.3 percent of the homeowner insurance business in Mississippi.
Mississippi Farm Bureau Mutual Insurance Co. is second at 20.9 percent, followed by Allstate Insurance Co. at 7.9 percent and Nationwide Mutual Fire Insurance Co. at 6.2 percent.