Consumer advocates from both the government and private sector are demanding state regulators to shoot down Texas Farm Bureau’s proposal to require customers to primarily handle their disputes through arbitration instead of taking it to court, reported the
Austin-American Statesman.
In arbitration, both parties must abide by the decision made by the arbitrator. Opponents to the arbitration plan say that the process can put the average consumer at a disadvantage when dealing with insurers that have a lot of resources.
Texas Farm Bureau Insurance Companies executive vice president Mike Gerik defended the insurer’s proposal, saying that if the endorsement was approved it would allow the insurer to continue operating in some parts of the state and could potentially offer customers opportunities to save on policies.
He added that it was due to the influx of litigations following storm weather that convinced the insurer to consider arbitration.
“This endorsement will provide a choice for our members who want to continue coverage with our company at a significant premium savings,” Gerik said in a written statement. “We believe an arbitration endorsement is a fair and reasonable choice.”
Office of Public Insurance Counsel head Deeia Beck wrote a letter to insurance commissioner David Mattax, warning the commissioner that arbitration endorsements on homeowner insurance policies can be dangerous to consumers. She also commented that there are better ways for insurers to deal with the rampant fraud and crooked lawyers that appear during severe weather events.
“This is a nuclear option to deal with a very small group” of wrongdoers, and it would have severe ramifications on consumers if approved,” Beck remarked. “Further, it could lead to other companies seeking similar endorsements and could create a completely one-sided system.”
Texas Watch executive director Alex Winslow pointed out a section on the insurance department’s website that states that arbitration should be voluntary and can only be done post-dispute. He also sent a letter to commissioner Mattax, arguing that, “if policyholders are enticed to accept the endorsement in exchange for a discount, they have not bargained or negotiated in any real sense.”
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