Farmers Insurance Goes To Court To Block State Review of Premium Rates
By: Ryan Smith, Insurance Business Magazine, August 2017
Farmers Insurance is asking a court to block a California review of its auto insurance rates from 2008 on.
Farmers’ rates are being challenged by consumers in a separate case. In a lawsuit against the California Department of Insurance, the company argued in a lawsuit that the department’s plan to review its rates is “unlawful under applicable law and current facts.”
A California law, Proposition 103, regulates insurance rates in the state. Under the law, the Department of Insurance must approve auto and property insurance rates. The law also allows advocacy groups to protest rate increases, inspect insurers’ records, and call for hearings, according to a Los Angeles Times report.
Insurers argue that the law can only regulate rates going forward, according to the Times. Farmers said in its lawsuit that the Department of Insurance can’t review rates approved almost 10 years ago. To do so and force Farmers to pay fines or refunds would be too broad an interpretation of Proposition 103, Farmers maintained.
California Insurance Commissioner Dave Jones, however, insists that the department has the authority to review past rates.
“We will defend against any lawsuit challenging the right of the insurance commissioner to seek information necessary to determine if an insurer has set rates that violate the law,” Jones said in a statement.
Farmers isn’t the first insurer to worry about retroactive rate cuts in California, the Times reported. Last year, the Department of Insurance ordered State Farm to lower its homeowners’ insurance rates going forward – and to lower the rates retroactively to July of 2015. The insurer ended up owing refunds of about $100 million. State Farm went to court over the matter, and a lawsuit is currently pending. A judge has so far ordered State Farm to make the rate cuts going forward but to hold off on the refunds for now, according to the Times.
