Posted On: May 9, 2007, 3:02 pm CDT

Posted By: History

Consumers are becoming sick of how they are being treated by companies like State Farm. Consumer complaint websites are full of complaints about State Farm and its practices. My3cents.com has long lists of reviews complaining about how consumers have been treated by the insurance company. Among the complaints:

• That State Farm added an additional premium after the initial premium had been paid;
• That State Farm only pays a portion of damages in an automobile rental accident regardless of who is at fault;
• That State Farm disagrees with police officers over assigning blame for car accidents; and
• That State Farm customer service representatives are rude, condescending, and give contradictory information.


However, it is not just consumers who are unhappy with the insurance industry. State Farm and other insurance companies came under fire from a recent report commissioned by John Garmendi, the California Insurance Commissioner. In his report titled "Lower Claims, Higher Profits: Where do Your Premium Dollars Go? An examination of the burgeoning profitability of homeowners and private passenger automobile insurance companies and its impact on consumers" (May, 2006) Garamendi studied loss ratios for a number of homeowner and automobile insurance companies including State Farm. In his report, Garamendi asked the question "Are premiums excessively high compared to the money paid out on insurance claims?"

Garamendi's report analyzed the loss ratio data for insurance companies from 2001 through 2005 (loss ratio is the ratio between the dollars paid out to settle claims and the dollars received from policyholders to pay premiums). Among his observations on auto insurance, Garamendi noted that most insurance companies are quick to submit rate filings in order to raise premiums when loss ratios increase, but when loss ratios decrease few insurance companies ever file to lower consumer premiums.

Garamendi also stated in the introduction to his report, "...an insurance company might have a lower loss ration when it fails to reduce its rates despite decreased losses. This is especially true if it had previously raised its rates when losses increased. If such a trend surfaces, one can infer that the insurance company is overcharging its policyholders."

State Farm and other insurance companies make a lot of money off the premiums they charge their customers, even if some of the premiums include illegal charges like the accident surcharge. If you paid the accident surcharge when you bought a policy with State Farm Insurance, you may be eligible to join a class action lawsuit. Talk to a lawyer to discuss your options.