Dale goes with best available option

By By Buddy Bynum / editor
Jan. 5, 2003
Caught between a rock and a hard place, state Insurance Commissioner George Dale has opted for a compromise he hopes will keep State Farm writing homeowners policies in Mississippi. But will his decision please policyholders who must pay the higher costs?
Using the authority vested in his office, Dale on Friday granted State Farm rate increases well below what the company had asked for. But the increases nonetheless will force policyholders across most of the state to pay 19.9 percent higher premiums when their policies come up for renewal, beginning June 1. On the Gulf Coast, policyholders will see a 25 percent increase.
The new higher rates will become effective for new policies on April 15.
Politically, Dale is certain to catch flak for his decision, even with his legitimate defense that without it State Farm might not write any more policies at all in Mississippi. The company had stopped writing homeowners policies in October after it said it lost $50 million in Mississippi last year and more than $110 million over the past five years.
No company can continue to lose that kind of money and still do business the way it had been done. And it would be a shame if homeowners in Mississippi were unable to insure their properties because the company that writes about a third of the policies disappeared from the scene.
Benefits
Like I said, a rock and a hard place. I didn't see any other insurance companies rushing in to fill the gap.
The at least temporary benefit of Dale's decision is that State Farm will be back in business in Mississippi. State Farm spokesman Greg Geren in Birmingham, Ala., said the company will not appeal Dale's decision.
We understand that rate increases impact our Mississippi policyholders,'' Geren said. "At the same time, we must remain financially strong in order to protect those same customers."
In comments he made before, during and after a Dec. 19 public forum on the rate increases, Dale clearly was not thrilled with the available options. Late last week, in announcing his decision, he noted that one key element of his job is to "maintain a marketplace for the sale of insurance."
Squaring up
Now, how does all this square with what State Farm had wanted an average 42.5 percent increase in homeowner rates in most counties and a 79 percent hike for flood and hurricane prone Gulf Coast residents? State Farm said these increases were essential just to break even in its Mississippi operations.
Do the lesser increases mean that State Farm still cannot break even in Mississippi and that additional rate hike requests will be coming along in the future?
Well, maybe State Farm recalculated, maybe Dale stood firm with what he could achieve in the political world in which he lives. Maybe it was a little of both.
My own view is that, given the degree of difficulty, Dale, an experienced, successful politician who lives by the vote, has come up with just about the best plan possible under the circumstances.
His decision may not get him through the 2003 statewide elections without opposition, but it does seem to be a responsible way to manage his office.
As a State Farm policyholder, I am attuned to doing the things the company suggests to help guard against claims, especially the fire, water and freeze-claims to which it attributes the bulk of rising costs.
Obviously, none of us can do much about the fierce weather that sweeps through the Dec. 19 tornado in Newton is the latest example. We've got to have adequate insurance coverage for our homes; in fact, mortgage holders demand it.
But we as homeowners can also do little things to help ourselves, such as installing fire detection devices, regularly replacing water hoses on washing machines and installing insulation around exposed pipes during winter. Even the little things can add up to additional security, and my bet is your local insurance agent, State Farm or any other company, can provide a list of helpful tips.