To: The United States House of Representatives
State Farm took $1.225b from policyholders' BANK ACCTS. AFTER THEY HAD CANCELED POLICIES. Congre...
Congress must Investigate State Farm’s Practices.
Many people remember the stories of Enron’s abuse; purposely shuttering power plants, falsely asserting energy shortages then using that lie as justification for selling energy at ridiculously overpriced rates. What if Enron was still operating today and, through revenue data reported to regulators, showed that it had inexplicably taken $593,067,000.00 from the people of Florida alone? If a different company, one that had—in September of last year, after 20 years of using illegal tactics to deny justice to 4.7 million defrauded policyholders—finally realized it had no other option than to settle for $250 million? Shouldn’t that company’s practices, considering its history, justify a Congressional investigation?
What if there are indications the ‘mysterious’ money’s accumulation was coordinated and motivated by and done in defiance of regulators. In 2004, a subsidiary of that company borrowed $750 million from the parent company. By 2008, that company was petitioning regulators and seeking permission to raise prices in Florida, claiming it was having trouble repaying that loan on time. Requests to increase prices by 67% then 47.1% were rejected by regulators as well as the governor. When a lawsuit, aimed at over-turning those decisions failed, the mysterious accumulation of large sums of money began.
If a Tyco had, using those same tactics, mysteriously accumulated AT LEAST $631,469,000.00 throughout the remainder of the country, would that merit a Congressional investigation? What if the Bernie Madoff’s ‘investment’ fund had allowed people to contribute monthly, with the company automatically deducting funds from customers’ bank accounts—then continued extracting funds from those people bank accounts—after they had canceled their accounts? Shouldn’t that merit Congressional investigation? If one company did all those things, shouldn’t it be investigated by Congress? What if the company appears to be purposely breaching contractual obligations, abandoning people in need, to save money?
As a result of Hurricane Harvey hitting during 2017, FEMA established Major Disaster Declaration Areas covering large portions Texas and Louisiana. In fact, according to the If FEMA’s spending, on 2017’s claims throughout those two states was $421,559,321.00 less than 2016’s—a relatively uneventful year—would that justify a Congressional investigation? Instead of FEMA, what if this was a private company—the largest homeowners’ (multiperil) and (private passenger) auto insurer in both states—but, despite being contractually obligated to process legitimate claims, drastically cut back spending? What if that company uses an ‘evaluation’ scheme that rewards claims processors for NOT providing services?
State Farm’s agents are independent contractors and responsible for processing payments—establishing autopay, extracting monthly premiums from policyholders’ bank accounts and deactivating autopay once policies become inactive. However, all funds go directly to State Farm Mutual. Company policy is to terminate agents and refer them for prosecution—if caught embezzling, without permission, even for small amounts. Consequently, the excessive $1,224,536,000.00 could not have been independently taken by agents.
Beyond that, the pattern by which the $1.225 billion accumulated indicates State Farm’s management coordinated taking those funds. It’s not only that $593 million (48.41% of the total) came from Florida—as though it was done to recoup that $750 million loan. State Farm’s Florida’s Auto line of business is almost 31/2 times the size of the Florida Homeowners’. Yet, 86.23 % of the unexplainable money taken from Floridians was taken from former Homeowners’ bank accounts. If agents were stealing independently, and managed to evade detection, they likely would have done so randomly—taking a much larger percentage from the larger pool, former auto policyholders.
Those numbers have been discerned by analyzing data State Farm is legally required to provide to states’ insurance commissioners—and that has been compiled into Market Share Reports by the National Association of Insurance Commissioners (NAIC). I worked for State Farm for almost four years. I constantly received complaints from former policyholders—angry that State Farm continuously took money out of their bank accounts—after they had canceled policies or their policies had lapsed (expired). Congress owes it to the American people to investigate State Farm’s practices—to determine how widespread the problem is and if this is the source for the AT LEAST $1,224,536,000.00 that cannot be accounted for.
Insurance companies report revenue as ‘Direct Premiums Written’, the equivalent of gross revenue and ‘Direct Premiums Earned’ (similar to net income). Reinsurance expenditures are the only costs, deducted from ‘Direct Premiums Written’, to arrive at ‘Direct Premiums Earned’. Reinsurance, known as insurance for insurers is...
Many people remember the stories of Enron’s abuse; purposely shuttering power plants, falsely asserting energy shortages then using that lie as justification for selling energy at ridiculously overpriced rates. What if Enron was still operating today and, through revenue data reported to regulators, showed that it had inexplicably taken $593,067,000.00 from the people of Florida alone? If a different company, one that had—in September of last year, after 20 years of using illegal tactics to deny justice to 4.7 million defrauded policyholders—finally realized it had no other option than to settle for $250 million? Shouldn’t that company’s practices, considering its history, justify a Congressional investigation?
What if there are indications the ‘mysterious’ money’s accumulation was coordinated and motivated by and done in defiance of regulators. In 2004, a subsidiary of that company borrowed $750 million from the parent company. By 2008, that company was petitioning regulators and seeking permission to raise prices in Florida, claiming it was having trouble repaying that loan on time. Requests to increase prices by 67% then 47.1% were rejected by regulators as well as the governor. When a lawsuit, aimed at over-turning those decisions failed, the mysterious accumulation of large sums of money began.
If a Tyco had, using those same tactics, mysteriously accumulated AT LEAST $631,469,000.00 throughout the remainder of the country, would that merit a Congressional investigation? What if the Bernie Madoff’s ‘investment’ fund had allowed people to contribute monthly, with the company automatically deducting funds from customers’ bank accounts—then continued extracting funds from those people bank accounts—after they had canceled their accounts? Shouldn’t that merit Congressional investigation? If one company did all those things, shouldn’t it be investigated by Congress? What if the company appears to be purposely breaching contractual obligations, abandoning people in need, to save money?
As a result of Hurricane Harvey hitting during 2017, FEMA established Major Disaster Declaration Areas covering large portions Texas and Louisiana. In fact, according to the If FEMA’s spending, on 2017’s claims throughout those two states was $421,559,321.00 less than 2016’s—a relatively uneventful year—would that justify a Congressional investigation? Instead of FEMA, what if this was a private company—the largest homeowners’ (multiperil) and (private passenger) auto insurer in both states—but, despite being contractually obligated to process legitimate claims, drastically cut back spending? What if that company uses an ‘evaluation’ scheme that rewards claims processors for NOT providing services?
State Farm’s agents are independent contractors and responsible for processing payments—establishing autopay, extracting monthly premiums from policyholders’ bank accounts and deactivating autopay once policies become inactive. However, all funds go directly to State Farm Mutual. Company policy is to terminate agents and refer them for prosecution—if caught embezzling, without permission, even for small amounts. Consequently, the excessive $1,224,536,000.00 could not have been independently taken by agents.
Beyond that, the pattern by which the $1.225 billion accumulated indicates State Farm’s management coordinated taking those funds. It’s not only that $593 million (48.41% of the total) came from Florida—as though it was done to recoup that $750 million loan. State Farm’s Florida’s Auto line of business is almost 31/2 times the size of the Florida Homeowners’. Yet, 86.23 % of the unexplainable money taken from Floridians was taken from former Homeowners’ bank accounts. If agents were stealing independently, and managed to evade detection, they likely would have done so randomly—taking a much larger percentage from the larger pool, former auto policyholders.
Those numbers have been discerned by analyzing data State Farm is legally required to provide to states’ insurance commissioners—and that has been compiled into Market Share Reports by the National Association of Insurance Commissioners (NAIC). I worked for State Farm for almost four years. I constantly received complaints from former policyholders—angry that State Farm continuously took money out of their bank accounts—after they had canceled policies or their policies had lapsed (expired). Congress owes it to the American people to investigate State Farm’s practices—to determine how widespread the problem is and if this is the source for the AT LEAST $1,224,536,000.00 that cannot be accounted for.
Insurance companies report revenue as ‘Direct Premiums Written’, the equivalent of gross revenue and ‘Direct Premiums Earned’ (similar to net income). Reinsurance expenditures are the only costs, deducted from ‘Direct Premiums Written’, to arrive at ‘Direct Premiums Earned’. Reinsurance, known as insurance for insurers is...
Why is this important?
State Farm has stolen more than $1.225 billion from bank accounts of its former policyholders—after they had cancelled policies and State Farm (confirmed by the company’s actions)—had no intention of reciprocally providing services. It also explains how State Farm has cut expenditures by billions of dollars (including $4.841 billion during 2017, compared to 2016)—through breaching of contracts (not honoring policies) on a massive scale.