First, Mississippi regulated flood insurance rates down to a level that it was impossible to make money, so State Farm's property coverage on the coast did not cover flood/storm damage. Then, after Katrina, Dickie Scruggs and company sued State Farm, and others, forcing them to cover storm damage from Katrina that their policies explicitly did not cover and were not priced to cover. So, facing a state government that, by fiat, forces their fees lower and their coverage higher, State Farm is trying to exit the property insurance business in Mississippi, and the state legislature is considering legislation to prevent them from leaving.So we have a bad court decision (people need money, insurance companies have money, who cares about justice?) potentially followed by bad legislation. The proposed legislation would require all auto insurers in the state to also write homeowners policies. If this passes then State Farm (and most other insurers) will weight their options and probably leave the state entirely. What then? My guess is that the state will come to its senses or, if not, will socialize a large part of the insurance system. So they'll create an even bigger mess.
Wednesday, February 21, 2007
Broken Courts Breaking Contracts
Via QandO and Coyoteblog: