FARMERS TO REFUND MILLIONS

Farmers Insurance Group and the Texas Department of Insurance (TDI) reached an agreement April 15 that stipulates the carrier will refund approximately $15 million to auto policyholders who paid the company too much in surcharges related to traffic accidents.
Insurance Commissioner Jose Montemayor and Farmers representatives signed the consent order, which requires full restitution of $10.6 million, plus 10 percent interest per year for overcharges beginning in 1991.

Although the company was fined $500,000, Montemayor agreed to waive $400,000 of the fine since Farmers self-reported the surcharge problem to TDI.

According to the order, Farmers’ records reveal 261,884 instances of policyholders being surcharged too long for accidents between 1991 and 2001, when Farmers completed implementation of an automated system for removing those surcharges.

All present or former Farmers policyholders for whom there is a record of an overcharge will be mailed checks and explanatory letters within 45 days of the signing of the order. Within 30 days of the date of the order, the company must make a database available by telephone for individuals to check to see if they are eligible for restitution.

In August 2000, Farmers informed TDI that the company had overcharged thousands of drivers whose premiums increased after being involved in at-fault traffic accidents. Under Texas law, insurance companies must levy surcharges for three years against policyholders who caused traffic accidents. The order said Farmers’ manual system for removing driving record surcharges did not remove all surcharges as they expired. Farmers notified TDI of its violations days before a planned class action lawsuit was to be filed against it on behalf of policyholders. The suit was dropped after Farmers and TDI began negotiations on how to refund customers.

Topics Agribusiness