Farmers Insurance Exchange must make refunds to 1,600 drivers

Investigation unearths “discriminatory” pricing practice

Farmers Insurance Exchange must make refunds to 1,600 drivers

Insurance News


Farmers Insurance Exchange will refund $315,000 to more than 1,600 Minnesota drivers, after authorities found that the firm wrongfully charged the said drivers with higher auto insurance rates.

The state’s Commerce Department said the insurer charged drivers with higher rates solely because they were home renters rather than homeowners. Minnesota law prohibits firms from setting auto insurance rates or benefits, or denying coverage, based on a driver’s status as a residential tenant.

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“You should not be forced to buy a house in order to get a fair price on your auto insurance,” said state Commerce Commissioner Mike Rothman. “It is not only unfair, but in Minnesota it is also illegal for an insurance company to charge more or discriminate against drivers simply because they happen to rent their homes.

Farmers Insurance Exchange is part of Los Angeles-based Farmers Insurance Group. The refund comes after the Commerce Department’s examination of Farmers Insurance Exchange’s pricing practices. The company identified 1,620 Minnesota policy holders affected by this “discriminatory” pricing practice. The firm was also penalized $75,000, and ordered to stop charging higher rates to renters. 

“The company has also agreed to end discriminatory discounts that favored policyholders who have both homeowners and auto coverage over policyholders who have both renters and auto coverage,” the department added.

Earlier this year, Farmers Insurance asked a Texas court to dismiss a class action lawsuit alleging that the company engaged in discriminatory practices and violated the state Insurance Code.

The complainants in the suit alleged that the firm violated the Insurance Code’s unfair discrimination provision by providing essentially the same auto insurance product at differing prices to new and old policyholders. Legal News Line reported that Charles Grigson and Robert Vale filed the class action suit with the US District Court for the Western District of Texas.

In its motion to dismiss, Farmers did not dispute the allegations levelled by the plaintiffs. However, these issues are moot, the motion further said, because state law requires insurance firms to file rates with the Commissioner of Insurance, and the firm had complied faithfully with these procedures.

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