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Company shifting member’s policies due to Katrina losses

Confusing, often dire, rumors about insurance coverage and insurance companies are part of Hurricane Katrina’s aftermath. One confusing rumor is about Mississippi Farm Bureau Mutual Insurance Company. Farm Bureau president David Waide sets the record straight. The policy-holder-owned mutual company is not pulling out of the state but is being phased out with policies shifted to the stockholder-owned casualty company.

“We had unprecedented losses from Katrina,” he said. “We are shifting all our mutual policy holders over to our Farm Bureau Casualty Company. It’s in the best interest of policyholders because we would have had to charge more for premiums. We have adequate funds in the privately-held casualty company.”

Farm Bureau Mutual had over 70,000 claims filed as a result of the hurricane with the bulk of settlements paid out south of Hattiesburg. Waide said the company still has about 5,000 claims to complete. In Mississippi there are 235,000 Farm Bureau members representing approximately 700,000 people in all 82 counties. The bureau was created in 1952 and the mutual insurance company formed in 1987. Coverage is for members’ homes but some businesses are included.

“We will transfer members’ policies to the casualty company and initially it won’t cost more,” Waide said. “They can expect some adjustment later, but we don’t expect premiums to double as has been rumored.”

He said the biggest increase will be for re-insurance, which the company has to buy from foreign firms and pass along to customers. Farm Bureau Casualty Insurance purchased re-insurance in August for a year and had a rate increase in October. Waide stresses that all rates are based on actuaries and are not done randomly.

“It’s too early to tell what the cost of buying re-insurance will be,” he said. “It’s always available, but it’s high. After this kind of loss, it always goes up. I hope we will be able to at least have some competitive bids on it.”

Farm Bureau Mutual Insurance Company sent a letter to all policyholders advising them of the change. “We’ve had good, positive feedback from our members,” Waide said. “As long as it’s Farm Bureau, they don’t care what company the coverage is with.”

Lance Wedgeworth, a Farm Bureau agent in Gulfport who’s been with the company for seven years, says he’s heard from customers who want to be reassured their coverage is secure.

“It’s a change in name only. Customers want to know what’s going on, if their coverage will change and make sure they’re not paying premiums to a company that’s going out of business,” he said. “The only change will be the name on the declarations page.”

He said customers want to hear the details from someone with the company. He assures them that Farm Bureau has been around a long time and will stay, continuing to give customers the same service. All seem to be okay with it once they understand what’s happening.

“I think there will be some industry-wide changes in deductibles down the road, but it won’t be just Farm Bureau,” he added.

Waide, a Clay County farmer elected to the president’s position for two years, says policyholders won’t know the difference regarding their Farm Bureau insurance. He’s not aware of any negative fallout from the decision to shift policyholders.

“They will still deal with the same agent and county Farm Bureau,” he said. “Farm Bureau has always been a dependable company in Mississippi, taking care of our members and we will continue to provide the same level of service.”

The Farm Bureau insurance companies have had growth for the past 38 years, and Waide says that will continue. “I think it’ll be a little harder to experience growth, but we will still grow. That’s our pattern,” he said. “The market will be hard in Mississippi for a while. People who deal with rural areas in Mississippi know our insurance and what to expect. They know what we do.”

A multi-line company, Farm Bureau is a single-state entity and Waide reiterates that the company will not pull out of Mississippi. The policy shift change was approved by the state insurance commissioner.

“Our 350 employees are exhausted, but we will be ready for the next catastrophic event although I hope we don’t have any,” he said.

The largest general farm organization in the state, Mississippi Farm Bureau is a voluntary, non-governmental, non-partisan organization of farm families. The bureau seeks solutions to the problems that affect farm families socially and economically. Providing property insurance through its companies is part of a wide range of services and benefits for member families. Farm Bureau is organized on a county, state and national level with the county the nucleus of the organization.

Contact MBJ contributing Lynn Lofton at mbj@msbusiness.com.

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