Posts tagged ‘State Farm’

Ethanol, Florida Style

It is difficult to imagine that we would have the extensive, absurd subsidies of corn ethanol that we have today if it were not for the fact that Iowa is the first stop on the presidential campaign trail.  Every four years, here-to-fore fiscally sober and rational candidates stand up on Iowa TV and pledge to support ethanol subsidies.

But today it appears the primaries are finally over (it appears that Ms. Clinton will bow out tonight) and so attention now focuses on the general election.  And though I am not really an expert, I would presume the election will again turn on a few states including Ohio, Pennsylvania and, of course, Florida.

It appears that Florida Democrats have a plan to parlay their swing state status into pork, in the same way that Iowa has done for years.  The only difference is the issue is not ethanol, it's subsidizing beach-front homes:

As hurricane season begins, Democrats in Congress want to nationalize a
chunk of the insurance business that covers major storm-damage claims.

The proposal -- backed by giant insurers Allstate Corp. and State Farm
Mutual Automobile Insurance Co., as well as Florida lawmakers --
focuses on "reinsurance," the policies bought by insurers themselves to
protect against catastrophic losses. The proposal envisions a
taxpayer-financed reinsurance program covering all 50 states, which
would essentially backstop the giant insurers in case of disaster.

The program could save homeowners roughly $500 apiece in annual
premiums in Florida, according to an advocacy group backed by Allstate
and State Farm, the largest writers of property insurance in the U.S.

But environmentalists and other critics -- including the American
Insurance Association, a major trade group -- say lower premiums would
more likely spur irresponsible coastal development, already a big
factor in insurance costs. The program could also shift costs to
taxpayers in states with fewer natural-disaster risks....

The legislation passed the House with bipartisan support, 258-155, late
last year, despite a presidential veto threat. Although a Senate vote
is unlikely this year, proponents are trying to make it a litmus-test
issue in the presidential race. The two Democratic contenders, Sen.
Hillary Clinton of New York and Sen. Barack Obama of Illinois, in their
recent visits to Florida -- a key swing state -- have both voiced
support for the plan.

Big winners would be coastal states, particularly Florida, where more
than half of the nation's hurricane risk is centered. Currently,
property-insurance rates in Florida are among the highest in the
nation. Florida also has a struggling state reinsurance fund that would
be helped by a federal program....

Florida's status as a presidential swing state has helped the plan win
support from Sens. Clinton and Obama. Sen, Clinton is one of the bill's
co-authors, along with Democratic Sen. Bill Nelson of Florida.

Florida Democrats' effort to make a federal disaster fund a big issue
in this year's presidential race was one reason the state moved up its
primary election to January from March, defying party rules. (That move
is partly what's behind the current, heated battle between the
Democratic candidates over how to count Florida's delegates in the
nominating race.)

Lèse majesté: When Politicians Throw A Hissy Fit

I am late in linking this, but it is an amazing story of what happens when we give politicians power over our lives.  The story is about Trent Lott's silly vendetta against State Farm insurance, which all started when State Farm took the ridiculous step of not paying off on flood damage to Trent Lott's home after Katrina just because ... yes, this is going to sound like a really weak excuse ... the policy did not cover flood damage.  Can you imagine?  Of course, it is clear that Lott knew this in advance, since he had sought out and obtained a separate flood insurance policy.  But still.  Don't they understand lèse majesté?

The Mississippian was "infuriated" by the insurance industry's
refusal to shell out for certain Katrina claims, most notably his own.
So Mr. Lott is spearheading a ferocious campaign of political revenge
that would make even Henry Waxman envious"”replete with investigations,
voracious trial lawyers, ambitious state attorneys general and threats
of punitive federal legislation. And like most personal grievances that
get morphed into policy battles, it's ending badly for consumers.

Lott's beachfront property in Pascagoula"”one of three homes he
owned"”was swept away entirely by Hurricane Katrina's waters. Like many
Gulf Coast residents, Mr. Lott was soon reminded by his insurer, State
Farm, that his policy only covered wind damage"”not flood damage. The
senator surely knew that, which is why he'd also purchased federal
flood insurance. According to his flood policy that was in effect when
Katrina hit, he was covered up to $350,000 in flood damages, and he
presumably collected in full....

For his part, Mr. Lott has been busy cranking up the pressure in
Washington. Not that he didn't give fair warning. In July of last year,
he placed a call to Chuck Chamness, the CEO of the National Association
of Mutual Insurance Companies, to let the industry know what was
coming. Mr. Chamness later sent a letter to Mr. Lott, summing up the
call. The key passage: "Your comment that you will dedicate your next
term of office to 'bringing down State Farm and the industry' through
all means available to you, including legislation designed to harm the
property/casualty insurance industry, was very unsettling, to say the

One addition to this story which I think occurred after it was written:  State Farm, for obvious reasons, decided they were going to exit the property insurance business in Mississippi.  The Mississippi legislature, in an act right out of Atlas Shrugged, is considering legislation designed to prevent them from exiting the business.  Judge Smales (of Caddyshack fame) summarized the situation for State Farm:  "You'll have nothing and like it."

Mississippi Considering Directive 10-289

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.

Mississippi Attorney General Jim Hood said Friday he will seek
legislation aimed at blocking State Farm Insurance Cos. from refusing
to write new homeowners and commercial policies in the
hurricane-battered state.

Hood's plan would require any company
that writes automobile insurance in Mississippi and also writes
homeowners policies in other states to offer homeowners and commercial
properties throughout Mississippi....

Hood also said he his urging Gov. Haley Barbour to issue an executive
order that would force the insurer to continue writing new policies
until the Mississippi Legislature can deal with the issue.

Quoting from directive 10-289 (Atlas Shrugged):

Point Two: All industrial, commercial, manufacturing, and business
establishments of any nature whatsoever shall henceforth remain in
operation, and the owners of such establishments shall not quit, nor
leave, nor retire, nor close, sell or transfer their business, under
penalty of the nationalization of their establishment and of any or all
their property.

So I ask you, is the following statement ridiculous  over-the-top regulator-speak from Atlas Shrugged, or was it actually made by a US state AG?

"We're looking at a robber baron in the face that is trying to make an example of Mississippi," Hood said of State Farm.

OK, so lets see:  The state government decides what rates you can charge.  The state government decides what your policy has to cover.  The state government decides if you will be allowed to go out of business.  But State Farm is the robber baron.  LOL.

Hat tip:  Tom Kirkendall