Farmers Insurance Rip Off of Its Own Insureds Exposed – But Is Mostly Ignored By Them

Farmers Insurance Company’s policy holders could file for refunds from a proposed $455 million settlement in a national class action lawsuit that accused the company of illegally inflating its rates by charging excessive management fees.

The case started out in a Texas court in 2007. It is now before a court in Los Angeles, which is expected to approve the settlement next month.

Texas Farmers is owned by Zurich Financial Services in Switzerland. Its national headquarters is in California. So much for the clever marketing aimed at Texans and farmers.

Less than a quarter of eligible Farmers customers have applied for the available refunds.
Maybe that’s because of the red tape and small average refunds involved.

Policy holders could receive up to $60.00, although the average refund is about $25.00. Texas will receive about $20 million of the total $455 million available. $350 million has not been claimed.

Former Texas Insurance Commissioner J. Robert Hunter stated that the proposal will do little for consumers, since most of the money goes back to Farmers, which will just keep it.

A consumer attorney said that “It’s ridiculous to require that their policyholders and former policyholders fill out and send in a claim form when Farmers could simply send them a check.”

Austin attorney Joe Longley, who represented one group of plaintiffs, said Farmers customers are better off with the California proposal than the original Texas settlement of $117 million in 2002. The agreement came after the company had threatened to pull out of the Texas home insurance market because of massive losses from mold claims.

Company officials also were stinging from repeated attacks by Gov. Rick Perry, who made Farmers his favorite target in his 2002 campaign.

The original settlement included rate reductions, premium refunds, higher discounts and miscellaneous refunds. Longley and his clients challenged that settlement, contending the amount was inadequate. Longley eventually had his Texas clients participate in the California case.

“We objected to the Farmers settlement as not being nearly enough, and as a result, the national class action case evolved out of the Texas case,” Longley said.

“Texas policyholders are getting a better deal with this [California] settlement because it is real money as opposed to credits or future reductions in rates,” he said.

Once the settlement is approved, Travis County District Judge Scott Jenkins will convene a hearing in Austin.

Another class action case affecting Texas policyholders of the company was approved in federal court in Oklahoma City last week for $40 million plus $8 million in attorney fees. That case involved faulty disclosures of premium discounts by Farmers.

Farmers is often difficult to deal with, and I sometimes file suit rather than try to settle with its adjusters.

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