CHARLESTON, W.Va.: West Virginia’s largest insurance company has stopped writing new auto policies in the state.
State Farm Fire and Casualty Co., which insures about one of every three West Virginia drivers, ceased writing new policies on Dec. 16, citing a lack of profits.
Current policyholders will remain unaffected, said Erin Bailey, a State Farm spokeswoman.
The company “was not having profitable growth” in West Virginia over the last several years, Bailey said.
Bailey blamed in part the threat of lawsuits. West Virginia is one of just a few states to allow third parties to sue insurers, which inflates lawsuit awards, she said. She also cited state laws limiting insurers from dropping high-risk policyholders.
“The legal environment in West Virginia is among the most difficult in the United States,” she said.
State Farm has stopped writing new auto policies in only one other state, Louisiana.
A national consumer advocate said State Farm is trying to recover billions of dollars lost in stock and bond investments by increasing rates and refusing to sell to new consumers.
“This is the nation’s largest insurance company trying to hold the state hostage,” said Doug Heller of the California-based Foundation for Taxpayer & Consumer Rights, saying State Farm was threatening policy-makers to limit its liability.
Heller said insurers give different reasons in different states, but their message is the same: Allow us to increase premiums or we’ll drop out of the market.
“In your state it’s the court system, in Texas it’s mold, in California it’s high employee costs,” he said. “When they have a tough investment year, they take it out on consumers, and blame it on something else.”
Three companies – State Farm, Allstate Insurance and Farmers Mutual Insurance of Fairmont – last year stopped writing new homeowners policies in West Virginia. All say they cannot make a profit in the state.
In 2001, 99 of the 130 insurance companies authorized to sell homeowners insurance in the state were doing so.