Oregon Consumers Get Refunds After Farmers Insurance Is Fined

Consumers holding Farmers Insurance auto policies up for renewal in Oregon scored a victory recently. Farmers Insurance Co. of Oregon has been changing consumer premiums based on current credit reports and insurance scoring when it’s time to renew policies. The company has been doing this for three years despite knowing the law does not allow this practice.

The Oregon Insurance Division has fined Farmers Insurance Co. of Oregon $10,000 for violations. Consumer complaints led to the investigation. Consumers were seeing their auto and homeowner insurance rates go up at the time of renewal after their policies were re-rated. The basis for the re-rating, it turns out, is the policy holder’s credit history and/or an insurance score.

Per state laws and regulations, a credit history can only be used to refuse issuing the first policy but not to make changes to premium rates once someone is accepted as a customer. During the three year period in question, January 2006 to February 2009, there were 8,385 cases where premiums for personal insurance policies based on credit history were determined. Out of the 8,385 cases there were 1,050 policies where the premium rates were increased.

Farmers Insurance says that it was a computer programming problem that caused the premiums to be increased on policies when they should not have been. The company says there was a system error to blame and that the problem has now been fixed.

The Oregon Insurance Division issued its final report on 30-November-2009 under Case No. INS 9-10-002. The stipulation and final order has been posted on the insurance division’s website for everyone to read. The Oregon Department of Consumer and Business Services Insurance Division issued a $10,000 civil penalty against Farmers Insurance as a result of its finding. In addition the company has refunded $64,840 to consumers who had their premiums raised as a result of a review of credit histories or insurance scores. Only policies still in force were eligible for refunds.

This is yet another reminder that it is incumbent on consumers to understand the law and how their personal insurance premiums are determined. When a policy holder does not understand his or her rates or believes a rate change has occurred in error, the insurance company should be able to clearly explain and justify the increase per the law. If a consumer is not satisfied with the response received from the insurance company agent, it is important to follow through by speaking with a supervisor or someone at the corporate office.

If at some point the consumer believes the insurance company has not followed the law, it may be time to report the matter to the government insurance division responsible for enforcement. Each state has an insurance division that accepts consumer complaints. Too many consumers watch their rates go up and never question how the amounts were derived. Though insurance rate calculations can be complex, consumers should understand exactly what they are paying for and be able to obtain a satisfactory response when premiums change.