State of Texas, Farmers Insurance reach agreement
News Release Date: 11/30/2002
Category: Company
Consumers to receive $100 million in settlement
AUSTIN - Today the Texas Department of Insurance (TDI) and the Office of Attorney General (OAG) reached an agreement with Farmers Insurance Group that that will effectively end the lawsuit and administrative enforcement actions that were initiated against the company in August.
As a result of the agreement, Texas consumers will receive $100 million in combined savings and restitution and Farmers Insurance will continue selling homeowners insurance policies in Texas.
"This agreement is good news for consumers and will have a positive impact on the Texas homeowners market," said Insurance Commissioner Jose Montemayor. "Farmers Insurance has a long standing relationship with Texas and I am happy that they will continue to play a vital role in the Texas insurance market."
In August, Texas Attorney General John Cornyn filed a lawsuit against Farmers Insurance Group for violations of the Deceptive Trade Practices Act and discrimination against some groups of homeowners. The Texas Department of Insurance also issued two enforcement actions against the company, including a cease and desist order, forcing Farmers Insurance to halt certain pricing practices deemed to be unfair to consumers. In November, a temporary standstill agreement was negotiated that allowed Farmers to continue doing business in Texas until December 10th while negotiations continued.
"TDI, the Attorney Generals Office, and representatives from Farmers Insurance have been working diligently over the past few weeks to find a solution to allow Farmers to continue selling homeowners policies and for Texas law to be satisfied. Today's agreement accomplishes both goals to the benefit of Farmers policyholders, Farmers agents and all Texas consumers," added Montemayor. "I believe that this agreement will begin a new, positive relationship between TDI and Farmers Insurance."
The settlement between the State of Texas and Farmers Insurance Group is the largest Property & Casualty Insurance settlement in the history of Texas.
Terms of the settlement between the State of Texas and Farmers Insurance Group are attached:
Settlement reached between the State of Texas and Farmers Insurance Group
as of November 30, 2002
Prospective Consumer Relief: effective 01/01/03 |
VALUE |
- Rate reduction of 6.8% effective until 09/01/03.
- Adjusted discounts for Credit Scoring/Age of Home; move to indicated discounts and freeze upper discount range at 47% for credit score and 40% for age of home.
- Territory relativities adjusted with TDI approval
- Credit Scoring disclosures acceptable to AG (homeowner and auto)
|
$35,000,000 |
Consumer Restitution: |
|
- Refund or premium credit for overcharges due to unfunded CAT load and management fee for policies written 12/28/01 through 11/10/02; payable at end of policy period by premium credit on renewal statement, premium refund due within 45 days if policyholder does not renew with Farmers
|
$35,000,000 |
- Refund or premium credit for overcharges due to improper Credit Scoring/Age of Home discounts and territory relativities for policies written beginning 12/28/01; payable at end of policy period by premium credit on renewal statement, premium refund due within 45 days if policyholder does not renew with Farmers
|
$25,000,000* |
- Refunds for incorrect credit scores and payment of credit reports, for homeowner and auto customers whose credit scores were incorrect due to errors on credit reports, which they were unable to correct due to inadequate notice by Farmers; funds to be transferred to an escrow account for stated purpose, to be supplemented by Farmers if necessary. Also includes reimbursement for state's investigative and attorneys' fees.
|
$5,000,000+ |
TOTAL: |
$100,000,000+ |
*If necessary refunds are less than stipulated amount, balance is payable to the state's General Revenue Fund.
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