Skip to Top Main Navigation Skip to Left Navigation Skip to Content Area Skip to Footer
Texas Department of Insurance
Topics:   A B C D E F G H I J K L M N O P Q R S T U V W X Y Z All

Summary State Farm Homeowners Rate Refund Order 2009


  • This order is the result of a re-hearing. The original rate reduction order was first issued in 2003, but remanded by the Third Court of Appeals in 2008 to TDI for further proceedings due to their finding that a portion of the underlying law enacted in 2003 was unconstitutional.

Policyholders - Refunds

  • The total amount of the refund, plus interest, is $310 million. Individual amounts will vary among policyholders, with differences based, in large part, on length of time with the company and the amount of premium paid to State Farm. Further information regarding refunds or premium credits to policyholders, both current and former, will be made available pending any appeal of the order.

Elements of the Rate Hearing and Review of Evidence

  • The actual hearing phase took place on separate days beginning on March 30, 2009, and concluding May 2, 2009.
  • The evidence, testimony, transcripts and exhibits numbered in the thousands of pages. In the succeeding months, time was taken to review the record and all admissible evidence, as well as drafting the order.
  • In the 2009 rate hearing, TDI Staff withdrew their -12% reduction due in part to SFL's premium calculation error that became known after the original September 2003 rate hearing. There was insufficient evidence in the record to sustain the -12% rate reduction originally recommended by Staff in 2003.

Elements of the Order

  • Base Refund. The Commissioner found SFL's rates were excessive and is ordering SFL to pay refunds amounting to 6.2% of premium for policyholders insured with SFL from September 2003 through August 2004. The Commissioner is also ordering SFL to pay refunds amounting to 3.4% of premium for policyholders insured with SFL from September 2004 through July 2008 (excluding new policies written from June 1, 2008, through July 31, 2008). The estimate of the total refunds ordered is approximately $257 million.
  • Interest. In accordance with the applicable statutes, and to compensate SFL's policyholders for the time-value of money, the Commissioner is ordering SFL to pay interest at a rate of 5.25% for policyholders insured with SFL between September 7, 2003 and August 1, 2008 (excluding new policies written from June 1, 2008 through July 31, 2008). This interest runs until the date of the Order. The amount of this interest is estimated to be approximately $53 million. The total interest and refunds is approximately $310 million. In addition, interest accrues from the date of the Order until final payment at a rate of 9.25%.
  • The Order allows SFL to make refunds to existing policyholders by providing a credit upon renewal. Affected policyholders who are no longer with SFL, or do not renew with SFL, will receive a check in the amount of the overcharged premium, plus interest. Renewal credits must be applied over a period of no more than 12 months.
  • In the Order, the Commissioner has recognized the benefit gained when SFL repays State Farm Mutual for the surplus note. If the surplus note is repaid, SFL will not be dependent upon State Farm Mutual for capital. This is not just a benefit to State Farm Mutual; it is also a benefit to SFL's policyholders.
  • A summary of differences in each party's recommended "initial rate reduction" and the Commissioner's ordered "initial reduction" can be found on page 73 of the Order.
  • SFL must begin applying renewal credits, and pay refunds and interest within 60 days.

Effect of Possible Appeal

  • SFL has the right to appeal the Order. If SFL appeals, the payment of all refunds and interest is "stayed" until final resolution by the courts.

For more information, contact:

Last updated: 9/6/2014