Consumer Watchdog Challenge to Farmers’ Auto Rate Filing Seeks to Enforce Proposition 103’s Good Driver Discount Policy Mandates

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Santa Monica, CA – Consumer Watchdog petitioned the Insurance Commissioner this week for a public hearing on the “new program” private passenger auto filings of Farmers Specialty Insurance Company, an affiliate of Farmers Insurance Exchange.

Consumer Watchdog’s petition seeks to compel Farmers and its affiliates to comply with Proposition 103’s mandate requiring insurers to offer at least a 20% discount to good drivers that meet the statutory criteria (i.e., in general, must be licensed to drive for the last three years and in that time, have no more than one violation point count on driving record and no at-fault accidents).  Another provision of the 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 Proposition 103’s 20% 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’s petition is aimed at ensuring that good drivers receive the lowest rates they are entitled to under Proposition 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 petition alleges.  Read the petition here:

“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,” said Cathy Lee, staff attorney for Consumer Watchdog.  “Consumer Watchdog’s petition calls on the Commissioner to order a hearing before an administrative law judge on Farmers’ rating practices so that these issues can be resolved in a public forum.”

Moreover, as the petition alleges, 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, which already has three separate rating tiers, including two discounted rates for business managers and professionals, 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.  Consumer Watchdog petitioned Commissioner Jones in late January to adopt regulations to prevent insurers from unfairly discriminating against insureds by using occupation as a rating factor, as Farmers does, which is not allowed by Proposition 103.  A decision on that rulemaking petition is expected tomorrow.

Over the past decade, Consumer Watchdog has invoked the public participation provisions of Proposition 103 to challenge more than 75 rate filings by auto, home, earthquake and medical malpractice insurance companies, saving California consumers over $2.9 billion on their insurance premiums.

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Pam Pressley
Pam Pressley
Consumer Watchdog's Senior Staff Attorney, Pamela Pressley has led Consumer Watchdog's efforts to enforce Proposition 103's mandates in court to protect California insurance policyholders against discriminatory practices and premium overcharges. Pam has authored appellate briefs and presented oral argument in cases successfully upholding the insurance initiative and other California consumer protection laws, resulting in numerous precedential published opinions, including The Foundation for Taxpayer and Consumer Rights v. Garamendi.

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