Consumer Watchdog in California Barks at Farmers

February 27, 2014

Consumer Watchdog has petitioned Insurance Commissioner Dave Jones a public hearing on the new program private passenger auto filings of Farmers Specialty Insurance Co.

The Consumer Watchdog petition seeks to compel Farmers and its affiliates to comply with Proposition 103’s mandate requiring insurers to offer at least a 20 percent discount to good drivers that meet the statutory criteria – including being licensed to drive for the last three years and having no more than one violation point count on driving record and no at-fault accidents in that timespan.

Another provision of state’s insurance code requires a group of insurers having common ownership, management or control like Farmers to sell a good driver discount policy to a good driver from the affiliate that offers the lowest rate for the coverage sought. This requirement prevents an insurer from circumventing Prop 103’s 20 percent good driver discount mandate by creating a subsidiary or an affiliate that can be used to cherry-pick certain preferred drivers and steer other non-preferred drivers into a higher rate policy, Consumer Watchdog said.

dog-150x150The group’s petition is aimed at ensuring that good drivers receive the lowest rates they are entitled to under Prop 103.

Based on Farmers Specialty’s new program applications and filings to date, Farmers has failed to prove that Farmers and its affiliates will comply with these requirements, the Consumer Watchdog petition alleges.

Farmers issued a response to the allegations in the petition:

“We believe our rate filing complies with all applicable statutes and we look forward to working with the Department of Insurance to answer any questions they may have.”

Cathy Lee, a staff attorney for Consumer Watchdog, stated: “Farmers should not be allowed to cherry-pick its customers by using multiple affiliates and multiple rating tiers to get around the legal requirements that it sell all good drivers the lowest rated policy for the coverage sought.

The petition also alleges that Farmers’ creation of yet another rating tier with the addition of Farmers Specialty auto rates within the Farmers Insurance Exchange/Mid-Century group of companies will potentially lead to unfairly discriminatory and/or excessive rates by charging similar risks different rates. The petition alleges that Farmers has failed to demonstrate in its filings how it will avoid charging unfairly discriminatory or excessive rates.

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  • March 26, 2014 at 1:23 am
    hossein assem says:
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