Editorial: Insurance Reform Pays Off In W.Va.

The Parkersburg News and Sentinel, May 4, 2005

The recent announcement by the State Farm Insurance company made it clear that Gov. Joe Manchin was right about reforming insurance laws. Reform legislation enacted this year has begun to pay off for West Virginians.

State Farm announced that it once again will accept new homeowners insurance customers in West Virginia, after a period of nearly three years in which such prospective clients were turned down. The same goes for most lines of business insurance offered by the company.

Some insurance companies have stopped writing certain types of new policies in West Virginia, because of poor risks in the state. In essence, they found that they were losing money-lots of it -because of the state's insurance laws. When State Farm stopped writing new homeowners' policies in July 2002 and business insurance in January 2003, the company noted that it had lost nearly $200 million in West Virginia during the previous 10-year period. Other companies echoed State Farm's complaints about restrictive West Virginia laws concerning insurance.

This spring, however, Manchin prodded legislators to enact certain reforms. One removes the restriction on insurers canceling more than 1 percent of homeowners policies annually. Another eliminates third-party, bad-faith lawsuits filed by people who, though not insured by the company they sue, accuse it of dealing with them in bad faith.

Another change allows insurers to refuse to renew some vehicle policies they consider to be bad risks.

Manchin argued that companies actually dealing in bad faith with West Virginians could be penalized by state government, perhaps through fines or refusal to allow them to do business in the state. Giving them more flexibility in dropping high-risk insurance policies and protecting them from third-party, bad-faith lawsuits would encourage more companies to offer coverage-at lower rates, Manchin argued.

State Farm's announcement proves he was right on one count. But the companies need to hold up all of their end of the bargain, by lowering premiums.

That needs to happen as soon as possible.

Insurance companies should waste no time in proving that reform will help West Virginians where it counts, in their checkbooks.