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Thursday, 20 September 2012 15:16

‘Is TDI Commissioner Kitzman Biased towards Insurers?,’ State Farm Investigated

Eleanor Kitzman, commissioner of the Texas Department of Insurance, is being accused of having a bias toward insurance companies as the result of removing consumer protections in health insurance rules, attending a campaign fundraiser held by an insurer, and for suggesting that the Texas Windstorm Insurance Association increase premiums. Her accusers include lawmakers, consumer advocacy groups and the Texas Medical Association, according to reports in the Texas Tribune.

Kitzman, who was appointed to her position, worked in the insurance industry for more than 20 years, but the article said that she believes the knowledge and experience she gained from her years in insurance help her in her position as insurance commissioner.

“I have friends who work in the insurance industry, but that’s not how I make decisions,” Kitzman told the Texas Tribune.

“There are many senators, Republican and Democratic, that are concerned that she’s a little too pro-insurance company,” said Sen. Bob Deuell, R-Greenville, who chairs the Senate Nominations Committee.

Now Kitzman’s TDI is expected to join with Texas prosecutors in conducting a criminal investigation into allegations that State Farm pocketed one billion dollars that should have gone to pay claims after 2008’s Hurricane Ike, and at least one legislator is asking the state insurance department to look into the matter as well.

According to state officials, the Travis County District Attorney’s Office has been collecting information for several months related to claim denials by State Farm Lloyd’s—the insurer’s unit in Texas—following Ike.

Allegations of claims mishandling has led to hundreds of lawsuits against the insurer, the state’s largest writer of homeowners’ coverage. Some lawsuits have been settled but others remain outstanding, including a multimillion dollar class-action lawsuit against State Farm that alleges fraud in adjusting primarily roof claims after the hurricane four years ago.

State Farm spokesman Phil Supple says the insurer “strongly disputes” the accusations and is working with authorities in their investigation.


“We are proud of our response to Hurricane Ike,” continues an emailed statement from Supple. “To date, we have paid more than $1.5 billion—much of which went to repair or replace roofs.”

State Sen. Rodney Ellis has asked the Texas Department of Insurance to once again look into the allegations and work with the Travis County District Attorney’s office.

In a letter to Insurance Commissioner Kitzman, Ellis refers to a letter he wrote to her a year ago regarding “serious concerns” related to State Farm’s “handling of Ike claims concerning roof shingles that were lifted or unsealed as a result of hurricane-force winds.”

Kitzman wrote back to Ellis and said her office has shared information with authorities. She says the department received four complaints in 2009 related to State Farm’s refusal to approve roof replacements for lifted shingles. The complaints were handled and the file was closed in December 2010, writes Kitzman, who took over as commissioner in July 2011.

However, the commissioner says, “Given the severity of the accusations made by the district attorney, [the insurance department] is carefully considering its options for further regulatory action in this matter.”

Earlier this month State Farm Lloyd’s said it filed for a 20 percent average statewide homeowners’ insurance rate increase due to the volume, and the escalating cost, of claims in Texas.

The insurer says roofing costs have risen 86.4 percent since 2007.

The new rates will go into effect Nov. 1 for new customers and Dec. 1 for existing customers.

This latest rate hike is on top of another increase earlier this year. The cumulative increase will be 31.5%—more than $400 more out of pocket—for the average State Farm customer.

State Farm has drastically increased deductibles on its customers. So, while the company is increasing rates, it is also reducing coverage.

State Farm has refused to comply with a 2003 state order to lower its rates and refund overcharges. A panel of judges in Austin are currently reviewing the decade-long legal dispute.

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