State Farm's rate hike under fire from citizens
By By William F. West / community editor
Dec. 20, 2002
JACKSON State Farm Insurance came under fire from angry citizens here Thursday in seeking a 42.5 percent rate increase on Mississippi homeowners.
Comments ranged from blunt to emotional as State Insurance Commissioner George Dale opened the floor to the public in a two-hour forum.
State Farm policyholder Vince Gibbs of Jackson was the most vocal critic. He accused the company of charging high premiums and bragging about having the highest paid executives and agents.
Gibbs identified himself as a former firefighter who is also licensed to sell property and casualty insurance.
Greg Geren, State Farm's public affairs manager in Mississippi, said the company is doing everything it can to control expenses.
Geren said the company has closed and combined claims offices throughout the state and has combined its executive structure in Mississippi, Alabama and Georgia into one office. He also said the pay of State Farm officials is in line with other insurance companies.
Company officials said a 42.5 percent rate increase is necessary just to get to the break-even point in its homeowner insurance business in Mississippi.
State Farm is the leading insurer of homeowners in Mississippi, with its agents writing more than 30 percent of the business. But a month ago the company ceased writing new homeowner policies in the state.
On Thursday, Geren and Susan Cleaver, a mathematical expert with State Farm's home office in Bloomington, Ill., presented the company's case for the rate increase.
Geren said State Farm suffered $103 million in losses from 1992-2001 and nearly $112 million in losses from 1997-2001. Cleaver said the losses in 2001 alone amounted to about $50 million.
Cleaver cited losses as a result of hurricane George in 1998 and windstorms and tornadoes in 2001. She and Geren also cited negative trends such as an increasing frequency of claims, rising material and labor costs and a declining economy.
However, State Farm came under further scrutiny because its proposed 42.5 percent rate increase is only a statewide average.
Under questioning by state Deputy Insurance Commissioner Lee Harrell, Cleaver said rates could go up as much as 79 percent for residents along the Gulf Coast. She also said rates could go up as high as 40.9 percent in Columbus which has been hit by two major storms in two years.
Cleaver said the company has 16 zones in Mississippi and that she based the varying figures on what the company expects to be paying in those zones.
Afterward, Dale, who is originally from Prentiss, but taught school and coached in Moss Point, was asked about the high amount State Farm policyholders on the Gulf Coast would have to pay if his office approved the rate increase.
Dale also said he wants to know more about State Farm's requests for rate increases in other states, mainly Louisiana.
He said he's troubled because State Farm is saying that their loss experience in Louisiana was worse than in Mississippi while their rate request in Louisiana was far less than what they're wanting in Mississippi.
Cleaver said State Farm asked for a 19.4 percent rate increase in Louisiana and received 11 percent. She added that the company lost $130 million in a New Orleans hail storm about two years ago.
