N.J. Insurer Draws Heat From State Regulators Over Drought Insurance
NEWARK, N.J. (AP) _ A New Jersey insurance company has drawn the ire of farmers and regulators in three states who say it appears to be reneging on an offer to provide drought insurance.
Insurance officials in Minnesota, Indiana and Ohio are looking into the policies offered during a six-week period by Federal Insurance Co., a subsidiary of the Chubb Group Insurance Cos.
The company is offering to return premiums to farmers, saying sales of the policies exceeded its coverage capacity. But officials in Minnesota and Indiana warned that Chubb could possibly lose its license to do business in those states if it did not provide the coverage.
″People are in a panic out here,″ said Keith Kendall, an administrative officer for the Indiana Insurance Department. ″They were lined up around the block to buy this stuff.″
Indiana’s insurance commissioner, Harry Eakin, said over the weekend that about 1,700 Indiana farmers had signed contracts for the coverage, paying $15 million to $20 million in premiums for coverage. He set a hearing for July 26.
Minnesota officials said last week that Chubb could lose its license if it fails to issue policies to about 1,000 farmers there. A state law says that if a farmer’s premium check is cashed, as has happened in most Minnesota cases, officials said, the policy cannot be canceled by the company.
Peg Ising, an assistant director in Ohio’s insurance division, said officials were concerned and looking at the situation in that state. She declined further comment.
Chubb said Monday that only about 40 policies had been issued out of thousands of applications filed May 1 to June 17, which was the deadline.
Shortly before the enrollment period expired, news stories about the drought and marketing combined to bring on a flood of applications, company spokesman Mary Lu Korkuch said.
″We are still seeking to determine the magnitude of coverage requested above the capacity limit which we are committed to, and we are working to develop a proposal to state insurance commissioners about how to best manage the situation,″ she said.
State regulators say Chubb promised to underwrite hundreds of millions of dollars in policies. The company also said it had authorized only $22.5 million in coverage.
Essentially, the policy offers coverage for crop damage due to below- average rainfall. Depending on the policy, the less rain that falls, the more money is paid.
Chubb apparently has been having trouble finding another company to offer insurance in its stead, said Eric Edgington, a spokesman for the U.S. Agriculture Deparment’s Federal Crop Insurance Corp. ″In years like this, only Uncle Sam has pockets deep enough,″ he said.