Consumer groups warn about insurance company's proposed policy change

A Texas insurance company is pushing for a policy change that would include a discount for customers. But consumer groups say that discount comes with a cost.

The Texas Department of Insurance said it will hear from the public on Wednesday about the proposal that would ask consumers to exchange their right to sue for a yet underdetermined discount.

More than six months after the December 26 tornadoes, there is still much to do before Sonya Cawthon and her family can move back into her garland home. One sticking point with her insurance company has been over the air conditioning units. Cawthon says her contractors recommend replacing them while her insurance insists on repairs.

“They're wanting more to patch it up after an EF-4 tornado has gone through my attic... has taken both my a/c units, taken them off their slabs, tilted them,” she explained. “Yes, they're saying that can be patched.”

Cawthon isn’t looking for a lawyer at the moment but knows it’s an option. It’s something one Texas insurer wants to limit in the future.

Texas Farm Bureau Insurance is asking the state department of insurance to approve new language that would allow it to offer customers a discount if they agree to settle disputes outside of court through arbitration.

Alex Winslow, executive director of a consumer group called Texas Watch, says customers would be at a disadvantage with arbitrators paid by the insurance company.

“If they slow pay, if they wrongfully deny your claim, if they underpay your claim, you'd never be able to take them to a court of law to hold them accountable,” Winslow explained. “Instead, you'd be forced into a biased kangaroo court where the rules of the game are set up by the insurance industry to favor the insurance industry against their own customers.”

The state's office of public insurance counsel agrees, adding other companies with the worst complaints over claims handling would seek a similar policy change.

In a statement, a spokesperson for Texas Farm Bureau said the mandatory arbitration clause would be optional and would give the company a way to "preserve" its ability to do business in "certain parts of the state."

Cawthon's is not a Farm Bureau customer. She's been with another company for 25 years. And even with all that history, she's still forced to sweat every decision made about her home.

The state commissioner of insurance, David Mattax, will be the one to make the decision on Farm Bureau's filing. First, there will be a public meeting Wednesday morning in Austin where people can weigh in. You can also express an opinion online through the Texas Department of Insurance website by 5 p.m. on Wednesday.

You can read Texas Farm Bureau's full statement below:

Texas Farm Bureau Insurance Companies have filed with the Department of Insurance an arbitration endorsement which, if approved, will preserve our ability to do business in certain parts of the state and give our members the opportunity to save money and make choices about their coverage.

We feel that the current litigation environment around severe storm events has created a situation where we need to offer an arbitration alternative in some areas to preserve our ability to write insurance. This endorsement will provide a choice for our members who want to continue coverage with our company at a reduced premium. If approved, their insurance agent will review the endorsement with them, and if they agree and choose the endorsement, they will sign for its approval. We believe many of our members will appreciate this option. And again, it is optional – our members will make their own decision if they want to elect it. It is their choice; under no circumstances are they required to accept it.

The Texas Farm Bureau Insurance Companies stand behind our reputation of value, trust and choice in protecting our members. We will take all appropriate steps to protect our members and our companies. We believe an arbitration endorsement is a fair and reasonable choice

- Mike Gerik, Executive VP of Texas Farm Bureau Insurance Companies

Up Next:

  • Popular

  • Recent

Stories You May Be Interested In - includes advertiser stories