Santa Monica, CA — Challenging a proposal from the Farmers Insurance group of companies to hike its homeowners insurance rates by nearly 7.0% overall, or $78 million, Consumer Watchdog filed a petition today alleging that Farmers should instead decrease its overall rates and urging the Department of Insurance to hold a hearing. The proposed rate increase affects over 1.2 million Farmers policyholders.
The overall rate hike Farmers is proposing for homeowners with Farmers Insurance Exchange, Fire Insurance Exchange, and Mid-Century Insurance Company coverage, would most adversely impact homeowners and condo owners who would see 7.8% and 9.8% overall rate hikes, respectively. While Farmers proposes to decrease its renters insurance rates by 9% overall, Farmers’ own data shows that renters should be getting at least a 40% decrease overall – meaning proposed renters’ rates would still be 30% higher than even Farmers says is justified.
Consumer Watchdog’s petition alleges that Farmers failed to justify the proposed rate increase as required by the voter-approved insurance reform law, Proposition 103. For example, Farmers over-projected insurance losses, which translates into higher-than-necessary rates for consumers. Farmers also charged itself nearly $2 billion for “management agreements and service contracts,” but claims these management fees paid to Farmers Insurance Group are not excessive and that it should be allowed to pass all of these costs on to policyholders.
“Most people don’t even have a choice about whether to buy renters or homeowners insurance,” said Consumer Watchdog staff attorney Jonathan Phenix. “Most mortgage lenders require homeowners insurance. Landlords have increasingly required renters insurance. Proposition 103 is critical to protecting the millions of consumers who must buy insurance from unjustified rate hikes like the one Farmers proposes here.”
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 has used the public participation process under Proposition 103 to save auto, home and medical malpractice insurance policyholders over $3 billion since 2003. 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.
View the chart of Consumer Watchdog rate savings: http://www.consumerwatchdog.org/sites/default/files/images/RateSavingsChart.png
And the Consumer Federation of America report: http://www.consumerfed.org/pdfs/whatworks-report_nov2013_hunter-feltner-heller.pdf
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