Farmers Insurance requests rate reduction

State Insurance Commissioner John Garamendi announced that Farmers Insurance has requested an 18 percent overall reduction in homeowners insurance rates for California policyholders. The $171 million in proposed rate decreases by the state's 2nd largest homeowners insurer will impact nearly 1 million homeowners and renters. The decreases will likely take effect in June.

The Commissioner applauded the rate filing and proposed cut in premiums by Farmers. This action and previously filed homeowner rate reductions by State Farm, Safeco, Hartford, USAA, Nationwide and Kemper insurance companies totaling $439 million, brings a significant conclusion to Garamendi's term as Insurance Commissioner and his campaign to bring down homeowner rates for California consumers. Garamendi will become California's Lieutenant Governor on Sunday, January 7.

In June, Commissioner Garamendi ordered Allstate, State Farm, Farmers and Safeco Insurance to justify their homeowner rates. The move was prompted by the Department of Insurance comprehensive study of homeowners and auto insurance rates which revealed that four of the state's largest homeowners' insurers were paying far less than 50 cents of each premium dollar to settle policyholder claims. The four insurers account for 51 percent of the California homeowners' insurance market. The study, called "Lower Claims, Higher Profits: Where Do Your Premium Dollars Go?" disclosed the historically low loss ratios that insurers have experienced over the past two years.

The Farmers rate cuts will benefit their Special Form, Protector Plus, Renters and Condominium Owners customers. It will increase the dual auto / home discount for customers who carry these policies from 12 percent to 15 percent and provide substantial discounts for newer homes and newly renovated homes as well.

As part of the new rate reduction filing, Farmers is also introducing a "claim forgiveness" policy for customers who remain "claims free" with the company for six or more years prior to filing a single claim.

The Department said the study was launched in response to an emerging trend in which insurance carriers have experienced dramatic reductions in the percentage of premium dollars used to pay claims.