California Business Owners Will Save $7.8 Million on State Farm Property & Liability Insurance After Consumer Watchdog Rate Challenge

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Santa Monica, CA – In response to Consumer Watchdog’s challenge to State Farm’s proposed rate increases on businesses’ liability and property insurance, State Farm has agreed to cut the average overall rates it charges wholesale, retail, and service businesses by 4.0% and agreed to not raise the rates paid by professional offices. As a result of Consumer Watchdog’s efforts, over 80,000 policyholders will save $7.8 million as compared to the rates originally requested by State Farm.

State Farm initially proposed average overall rate hikes of 5% for wholesale, retail, and service businesses, like barbershops and books stores, and 5.5% for professional offices, like accountants and real estate agents. However, Consumer Watchdog analyzed State Farm’s data and found several errors with State Farm’s methodology, including over-projecting costs for catastrophes like wildfires and improperly estimating insurance losses and premium revenue. On April 20, 2016, Consumer Watchdog challenged the proposed rate hikes under the voter-passed insurance reform initiative, Proposition 103, and urged State Farm to decrease its rates.

In response, State Farm agreed to not hike rates for professional offices, and the California Department of Insurance has approved the 4.0% overall rate decrease for wholesale, retail, and service businesses, resulting in the $7.8 million savings. Qualifying policyholders who purchase a new policy or renew an existing one after November 15, 2016 will be eligible for these savings.

“State Farm has tried to impose excessive rates for millions of policyholders in the past several years,” said Consumer Watchdog staff attorney Jonathan Phenix. “Large and small business owners in California will now get a $7.8 million break from these overcharges, and we’re hopeful that other State Farm policyholders will soon get the rate reductions and refunds they deserve.”

Other Proceedings Involving State Farm’s Unjustified Proposed Rates

Earlier this month, on August 1, 2016, Consumer Watchdog challenged the insurance rates State Farm proposed to charge for coverage of dwellings occupied by tenants. According to Consumer Watchdog’s analysis, State Farm’s overcharges in that case may reach as high as $100 million unless State Farm cuts its current rates by up to 40%.

In another proceeding involving State Farm’s renters and homeowners insurance rates, an administrative law judge recently issued a proposed decision and order recommending that Insurance Commissioner Dave Jones reject State Farm’s 6.9% overall rate hikes and order State Farm to decrease its overall rate by 7.0%. The administrative law judge also recommended that State Farm refund its homeowner policyholders over $85 million in premium overcharges from July 1, 2015 to date.  Insurance Commissioner Dave Jones has not yet issued a final order adopting the proposed decision. Instead, on August 8, 2016, he referred the matter back to the administrative law judge for further briefing and evidence on whether State Farm should be required to pay interest on any refunds of excessive premiums that may be ultimately awarded, and if so, what is an appropriate interest rate.

Since 2006, Consumer Watchdog has used Proposition 103 to save State Farm policyholders over half a billion dollars. Under Proposition 103, insurance companies must justify the auto, home and business insurance rates they charge to consumers, and consumers have the right to request a public hearing to challenge rates.

Consumer Watchdog is a non-profit non-partisan organization. Since 2003, Consumer Watchdog has used the public participation process under Proposition 103 to save auto, home and medical malpractice insurance policyholders over $3 billion. Proposition 103 has saved motorists alone over $100 billion since its passage in 1988, according to a 2013 report by the Consumer Federation of America.

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Carmen Balber
Carmen Balber
Consumer Watchdog executive director Carmen Balber has been with the organization for nearly two decades. She spent four years directing the group’s Washington, D.C. office where she advocated for key health insurance market reforms that were ultimately enacted into law as part of the Affordable Care Act.

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