An appeals court on Monday backed State Farm’s bid to hide from the public how many home insurance customers it serves or cancels in Florida, leading consumer advocates to mourn a loss of transparency and accountability.
If there are no further challenges and competitors follow suit, the decision could wipe out public access to information about potentially all of the hundreds of property insurance companies in Florida’s Quarterly and Supplemental Reporting System, or QUASR. The state’s Office of Insurance Regulation, the losing party in the case, did not immediately issue a public statement.
“The public needs the information to be able to understand the rates being proposed and try to intervene for relief when an insurer is using unfair or improper prices,” said Bob Hunter, director of insurance for the Consumer Federation of America.
The ruling also hides from the public any troubling matters like “redlining,” which can reflect unlawful discrimination against certain communities, he said.
State Farm failed to get a similar ruling a decade ago. This time an appeals panel backed a Leon County judge who found State Farm met the burden of the law as written, News Service of Florida reported.
“As to the central issue here — whether State Farm demonstrated that its data possessed independent economic value to others — the testimony of multiple witnesses supported State Farm’s case,” said Judge Timothy Osterhaus, writing the main opinion for a 3-o decision of the 1st District Court of Appeal. “A State Farm executive testified, for instance, that a competitor could use the data ‘to see where we’re actively growing. And then go someplace else deriving economic advantage by not having to invest marketing money where they know they can’t advance.’ ”
Despite its arguments in court, numbers have shown in the recent past that State Farm was not “growing” its homeowner business on a statewide basis at all, but perhaps did not welcome publicity that could hurt other lines of business including auto policies. Insurer advertising often emphasizes themes of trust such as being a good neighbor.
State Farm was once Florida’s largest property insurer but has dropped hundreds of thousands of homeowner policies in a major insurance crisis for the state. That helped swell the ranks of state-run insurer Citizens and smaller start-up companies in Florida.
In 2014, State Farm said it was “re-entering” the Florida homeowner market but dropped more than 40,000 customers, or more than 10 percent, in the year following that, The Palm Beach Post reported.
Last year State Farm said it was no longer talking to the newspaper because of its coverage of the issue.
“Thank you for reaching out, but unfortunately due to your consistent approach of continuously writing negatively about State Farm in your news stories, we are no longer responding to your inquiries,” spokeswoman Michal Brower said.
Proving that data provide “independent economic value to others” is a trivial hurdle to lock the public out of a state system that has been in place for years, said Birny Birnbaum, executive director of the Center for Economic Justice in Texas. He has participated in rate hearings and other insurance proceedings in several states including Florida.
“The fundamental problem is that the bar for ‘proving a trade secret’ is absurdly low,” Birnbaum said. “There is no harm to State Farm from release of these data and the so-called proof was simply assertions without any evidence.”
As for value to competitors, the information hardly represents advance warning of a marketing strategy, he said. QUASR numbers form a snapshot at least six months old, he said.
Yet the information has value to the public because it shows how many policies a company is adding, canceling or not renewing statewide and in individual counties, advocates said. Among other things, that allows consumers to judge how likely a company might be to stand behind or drop customers in a given market, which might be at odds with advertising or public statements.
Rates are regulated in part because many forms of insurance are required by law, such as with auto coverage, or by mortgage lenders or government agencies in the case of home insurance, advocates note. So there is a public interest in transparency about annual costs that are not far from taxes in the impact on a typical family.
Birnbaum called it “another loss for transparency and for the goal of public records laws — public accountability.”
Update: “The Office is in the process of reviewing the decision,” said Office of Insurance Regulation spokeswoman Amy Bogner.