Like a Good Neighbor, State Farm is There With a Rebuttal

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.


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


Edit Your Comment

  1. non-meat-stick says:

    marijuana eh? What’s that website…

  2. AppTechie says:

    I just have to address this idiot:
    1. Forcing someone to put $100 in an account just so they can avoid a rate hike is downright criminal in my mind.

    2. Don’t try to pass it off, you suck and always have over there at State Farm, I should know…I live in Texas where you pulled your homeowners insurance availability because you are a bunch of whiny pricks.

    3. $2600 is not a small deductible. I live in Texas, own a home in Texas, and have full homeowner’s insurance through Geico/Travellers that has a deductible of $500. Yes, that’s right! Geico does offer homeowners. Maybe you should research that next time before speaking out your ass. Stick that in your craw and smoke it.

    4. So, we should work together to stop the upward pressure? How about you worry more about your customers than your bottom line…which is excessive to begin with. Not to mention that all these insurance companies have their own insurance against losses through payouts. How do I know? I occasionally smoke with a nice lady who works for one of the insurer insurers in my building…and it really is amazing how little insurance companies have to pay out thanks to their own insurance against paying…which is the real reason for the holdup when you have a claim that is in dire need of paying.

    I really wish these asses would get that this kind of crap doesn’t fly in a connected world. Thanks to sites like this one, we all know how full of sh!t companies like this are.

  3. slinky22 says:

    Hi Mike. Harry here. This is $100 that I can no longer use to fund my childrens’ college education, or my groceries, or my gasoline addiction. In fact, I can’t realistically use it until I decide to end my relationship with State Farm. At which point, of course, I’ll collect my money and the money State Farm is “paying” me to keep it there, a whopping 1.9 annual percentage rate. If I stay with you guys for 10 years, I might make $20, after taxes, of course.

    Don’t try to lecture me about “saving money.” I could get a better rate on that $100 in any of my other savings accounts. No, the main reason I parked my money with State Farm was to avoid getting reamed if I had an insurable event or two in the next couple of years.

    I also happen to like my insurance agent and I appreciated the fact that he called me up to warn me about the policy change in time for me to say goodbye to $100, rather than an additional $1500 per insurable event.

  4. Paul D says:

    What, exactly, was the purpose of pointing out that Peter Lewis is a “marijuana proponent”? Was that some Fox-News-esque attempt to discredit him?

    Well it failed miserably.

    Though I have no idea who he is, Peter Lewis is now officially much cooler than you are.

    PS: The insurer is, by his very nature, always the bad guy. Insurance is a racket. Always has been.

  5. mrscolex says:

    Peter Lewis has been involved in the marijuana legalization movement.

    Because he knows that every legal pot smoker is an extra way for insurance people to jack up their rates ;)

    Why? This one is an easy one. They did a computer simulated model where they determined that there are a significant population of Americans who smoke marijuana with the same risks as those who smoke cigarettes (more or less depending). However there was no way to jack up their rates based on this significant demographic of potheads because they had to assume that we’re all good law abiding citizens– even though they could clearly tell whom had been a marijuna user during their mouth swab tests.

    They ran the numbers in accounting software, made projections, and determined that if Marijuana was legalized they could increase their profit margins by a significant number by scraping the money from all of the potheads in the country at the same rates as cigarette smokers.

  6. djwoodyphl says:

    I’m thinking I’d rather take that $100 … drop it into my ING Direct account … make at least twice as much money given their current interest rates, and redirect my efforts toward finding an insurance company that has a clue.

    Gotta love it when rebuttals sound much like they’re coming from the word inside the word. :)

  7. OkiMike says:

    This Peter Lewis guy sounds like my kinda guy! Everybody should buy from Progressive!

  8. billhelm says:

    I’ll just stick with USAA, who provides me all of my insurance needs and doesn’t have any of these bs charges.

  9. tinfoil says:

    In State Farm’s defence, I am a very happy SF customer, though in Canada and for automotive (they won’t insure my house due to its age.)

    My wife wrote off my old car, a Grand Prix GTP, last year and SF Canada was helpful and fair in most aspects of the transaction with the exception on them insisting that I take an economy car for my rental when the vehicle that was insured was certainly not that. They gave me fair value for the vehicle and extended my rental for an extra 10 days because I hadn’t yet found a suitable replacement.

    Sure, my insurance rate went up, as I was expecting. However, instead of getting seriously jacked, they instead took my discount of 15% off and are now giving me only 5% off.

    I realise it’s not an apples-to-apples comparison, but State Farm Auto in Canada are pretty good folk.

  10. itsasecret says:

    State Farm is a business. Their goal is not to insure/payout. It is to collect and make money. If you have a problem with State Farm paying out, you should look at the case and caselaw surrounding their refusal to dispurse funds after a catastrophy. Clauses like, “Normal wear and tear” and “natural Earth settling” and even “Act of God” all take a different meaning when you have to litigate what that language actually means. Do you have 100k in the bank to determine what falls under these categories and what is to be paid for? Of course not or you wouldn’t be trying to collect a claim for a debacle that has already tied up your life. Do you realize that when their agent comes to your house to assess the damanges, they are really documenting and looking for other reasons to blame the claim on. Reasons that will take the claim outside of the contract? Probably not, you hope that someone in this world has compassion and, well, you think you paid for theirs. You didn’t though, you realize as you pump out a 10K retainer to an attorney to try and resolve a situation that you though you had preemptively resolved. We need to educate our children and stop being consumers of companies that are known to operate in this manner. I’ll tell you what extortion is. Extortion is forcing consumers to buy insurance. Mandating it. If the bank wants insurance for their investment, they should foot it and it should be optional to consumers. That way we, the consumer, can at least gamble on where and what we want to do with our money. The bank is making interrest either way. It would suck to pay off a loan when you don’t have a home, but would it be any worse than paying an attorney to get the money to fix the house that you paid the insurance company for? I don’t think so. We all make our own choices in this world and State Farm is a poor one. Like a good neighbor my butt.