Back in February, Harry wrote a complaint about feeling extorted by State Farm.

Today, Mike Sipes, a State Farm agent, wrote in to address that complaint.

Exciting!

We applaud State Farm for taking the time out to take part in the conversation. And for letting us know that the CEO of Progressive Auto Insurance is a marijuana proponent.

All the dope, after the jump…

State Farm was going to raise Harry’s housing deductible by 150% as he only had a single line of insurance with them. His agent helped him figure out that if he opened a minimum savings account with State Farm and put $100 in it, then he could have multiple lines with State Farm and avoid the hike. Harry bristled at the idea but went through with it.

Mike writes:

“A gentleman named Harry recently made a comment about being “extorted” by State Farm to purchase another product from State Farm to keep his deductible low as he was a one line customer. This was a Feb. 23, 2006 posting. Your comment was, “Way to go, Harry.” Well,…

1. Putting $100 in a bank account hardly qualifies for extortion money. It is still Harry’s money and he is being paid to have it there. It is called “saving money”. Great rates for savings by the way.

It is also still money that State Farm gets to use. Harry was mainly joking by calling it extortion.

“2. Progressive, led by marijuana proponent Peter Lewis, and Geico, a Berkshire Hathway company, are in the more profitable auto insurance trade because they have no expertise or the stomach for the homeowners business which is mauled by catastrophic weather and flavor of the month trendy losses such as dreaded black mold. State Farm is most likely saying that they supply local personal service beyond what these companies offer and find a little problem in being these companies homeowner insurance provider.

3. The deductible of 1% on his home is $2600 because of the worth of his home. The homeowners in Fla. and Texas would love a deductible that low. The choice is affordable insurance to protect against catatrophe, or no insurance available which puts the ability to own a home through mortgage a dream. You must have insurance to protect collatteral, i.e. your home.

4. The need is for everyone to work together to stem the upward pressure on the cost of homeowners insurance instead of always making the insurer the bad guy because he is the messenger.

Mike Sipes
Graham, Texas
State Farm agent

Good points, Mike, thanks for writing in. But nowhere do you address the understandable frustration that Harry felt. Also, you can look it one way and see how, in coughing $100 to avoid an injurious rate increase, Harry is paying to avoid pain. While not extortion, it feels “extorty,” it exhibits “extortiness.” See also L_Emmerdeur’s excellent question in the original post about monopolistic tying practices.

Previously: Like a Good Neighbor, State Farm is There With a Helping Hand and a Hatchet

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