Best is reporting that State Farm continues to retreat from the insurance business in Mississippi. The headline suggests that State Farm merely canceled policies, but the article reveals that State Farm canceled 900 policies, and changed the terms of 5,000 more customers by refusing to insure for wind peril. As I have explained, our largest insurance carriers are getting out of the risk business.
Allstate, State Farm and Nationwide are following a business strategy that reduces their financial risk to catastrophic loss. They want to be in the business of "for sure" profits, which is more commonly found in the automobile and life insurance industries. These insurers are getting out of a business they once fought to dominate.
Like casinos in Las Vegas, they want the odds only in their favor and will change the rules to make this happen. Blackjack was the only game against the casino where careful play could provide an advantage to the player. The casinos have changed those rules, just like the insurance industry is doing to its customers. State Farm only wants to insure structures where the rates and percentages are so far in its favor, it can never lose. By excluding wind and flood peril from coverage, State Farm truly covers only the very remote peril of fire in its customers’ policies. This results because all other ensuing losses can arguably be denied under the anti-concurrent causation language found in their policies.
The implication is that consumers are going to have to help "start up" competitors and have some governmental backup until the private insurance market can develop these new entrants. Regulations should be considered which provide rate incentive for these entrants and penalize the old line carriers for depopulating its pool of customers through the cherry-picking of risks. The old line carriers are simply killing society’s ability to have an orderly insurance market.Could you imagine if the health insurance industry started to cancel policies for people over sixty and women between the ages of 18 and 38? What if we allowed health carriers to cancel or non-renew your policy if you were 15 pounds overweight or had a history of cancer in your family? This is what we are allowing the property and casualty industry to do. We simply have to stop it.
