Insurance – Over Charged, State Farm Insured To Receive $350 Million – Judge Ordered
April 14, 2011
The proponent of Tort Reform (or Deform) often cite to Texas as an example where Tort Reform progress. Aside from the fact that Tort Reform has not resulted in lower insurance premiums in that State, the case of State Farm Insurance evidences the fact that, left to their own device, the Insurance Industry will take advantage of customers and consumers given the opportunity.
A state judge in Austin ruled on Monday that State Farm Insurance owes nearly $350 million to customers overcharged on premiums from 2003 to 2008. 1.2 million customers are expected to be paid on average $200 to $300 each. State Farm has indicated it will appeal the decision.
The court order stems from an investigation by the Texas Department of Insurance, which found that State Farm overcharged customers on homeowners’ coverage. State Farm’s counsel argued that the $350 million refund would wipe out a third of their capital and threaten its ability to continue to insure. But contrary to this claim, the Insurance Department showed that State Farm collected more than $1.7 billion in homeowners’ premiums from Texans in 2010, and only paid out 52% of the premiums. This leaves a profit, excluding overhead, of $816 million for 2010 alone.