State Farm Stops Selling Car Insurance in West Virginia

Published on

The Charleston Gazette

Their motto says, “Like a good neighbor, State Farm is there,” but that’s no longer true for state residents looking to buy auto insurance.

Effective Dec. 16, the state’s largest insurer stopped writing new auto policies in West Virginia, company officials said. State Farm insures about one of every three drivers in the state.

Only in one other state, Louisiana, has State Farm stopped selling auto insurance to new buyers, according to company spokeswoman Erin Bailey.

The decision should not affect current State Farm policyholders, Bailey said.

In April, the company raised rates by an average of 11 percent on state auto policies, after an eight-year period during which State Farm‘s overall rates in West Virginia declined by 4 percent.

Bailey said the company “was not having profitable growth” in the state in the last few years, which she blamed in part on lawsuits.

“The legal environment in West Virginia is among the most difficult in the United States,” she said.

But a national consumer advocate said State Farm was “making threats to regulators and lawmakers as a tool to limit their own liability and accountability.”

“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.

Bailey said West Virginia’s “restrictive cancellation and nonrenewal law has forced us to retain policyholders when they become high risk, and add to cost of claims.”

She also said West Virginia was “one of only a few states that allow lawsuits against insurers by third parties” if they are found to act in bad faith. “Trial lawyers use the threat of bad faith to inflate claim settlements,” she said.

But recent state Supreme Court decisions, including the Broadnax decision, had “no real bearing” on the decision to stop writing new auto policies, Bailey said.

Heller said State Farm is trying to recover the billions of dollars it lost in the stock market by increasing rates and refusing to sell to new consumers.

Across the nation, insurers give different reasons, but their message is the same, he said: 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. When they have a tough investment year, they take it out on consumers, and blame it on something else.”

Heller said tougher regulation, not tort reform, is the answer. For example, the state Legislature could force companies to sit out of the market for 10 years if they refuse to sell to new buyers, he said.

“They can’t just come in when the market’s good and cherry-pick customers, and then leave,” he said.

He credited the passage of Proposition 103 in California in 1988 for lowering insurance costs for medical malpractice, autos, homeowners and others. Proposition 103 ordered insurance companies to roll back rates by 20 percent, required a further 20 percent discount for good drivers, imposed stringent regulation of the insurance industry, he said.

Also, at least three insurers are refusing to sell new homeowners policies in West Virginia.

State Farm and Allstate announced in July they would stop writing new homeowners insurance in the state. Farmers Mutual also decided in December to cease selling new homeowners policies.

State Farm has about 30 percent of the state market, Allstate about 8 percent, and Farmers Mutual another 3 percent.

In 2002, State Farm increased its rates on average by more than one-third for homeowners insurance in West Virginia.

Homeowners should not have difficulty finding insurance, however, because other carriers are continuing to write new policies, Insurance Commissioner Jane Cline said.

In 2001, 99 of the 130 insurance companies authorized to sell homeowners insurance in the state were doing so. Also, the state-run Fair Plan program helps people who cannot get homeowners insurance through the regular market.

Cline said anyone with questions should contact the Insurance Commission’s Consumer Services Division at (800) 642-9004 or on the Web at

On the Net:

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases