TDI: State Farm, Farmers Rates Should Be Lowered

November 9, 2004

The Texas Department of Insurance on Nov. 9 released the following statement concerning the recent court ruling on the State Farm and Farmers homeowners rate reduction orders:

On November 8, 2004, a state district court ruled that a portion of the 2003 law allowing for immediate homeowners’ relief was unconstitutional. TDI does not agree and is exploring all legal options on behalf of Farmers and State Farm policyholders, including future rate actions and legal appeals.

“We’re very disappointed with the ruling, and the companies’ failure to provide policyholders with the rate relief they deserve,” said Mike Geeslin, TDI Deputy Commissioner for Policy. “The rest of the market has complied with the law, and State Farm and Farmers, representing 40 percent of the market, need to do the same. The numbers speak for themselves.”

State Farm was ordered to reduce its rate by 12 percent and Farmers by 17.5 percent. This represents $243 million owed to their policyholders, not counting interest that has accrued over the past 14 months.

The court’s ruling overturns the homeowners rate relief ordered for Farmers and State Farm policyholders in August 2003. These orders were issued after the companies had the opportunity to justify their current rates in a hearing before Insurance Commissioner Jose Montemayor. The ruling applies only to the immediate rate reduction provision of Senate Bill 14. The remainder of the 2003 reforms are not affected. The court’s order did not dispute the underlying facts of the rate reduction ordered.

TDI stands by its analysis of rates charged by Farmers and State Farm: those rates need to be reduced. TDI believes that it followed all due process procedures outlined in the law. Further, no analysis has been provided to the Department indicating that the orders would have harmed the companies.

As always, insurance consumers can shop for alternatives. There are several resources available on the TDI Web site ( and by calling toll-free, (800) 252-3439. The TDI Web site has resources for contact information and consumer advice.

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