Commissioner Lara Should Reject Farmers’ Auto Insurance Rate Hikes and Stop Surcharges
News provided by Consumer Watchdog Mar 31, 2020, 15:31 ET
LOS ANGELES, March 31, 2020 /PRNewswire/ — Insurance Commissioner Ricardo Lara should reject Farmers Insurance Group’s proposed 6.5–6.9% auto insurance rate increases and its 3-tiered rating system based on occupation under which first responders and essential workers on the front lines of the battle against COVID-19 pay higher rates, wrote Consumer Watchdog in a letter to the Commissioner today. Farmers’ request comes as a deadly pandemic sweeps California, for which virtually every California business has been ordered to close and residents ordered to stay home.
Under Farmers’ proposed rates, grocery clerks, delivery drivers, janitors, and warehouse workers will see their auto insurance rates increase by another 6.9% – on top of a 6.9% rate hike approved in December 2019 that took effect March 10. Farmers’ request also includes a 6.8% rate hike on police officers, firefighters, nurses, and other emergency workers – our coronavirus first responders.
“The last thing Californians should have to worry about when they are trying to keep themselves, their families, and the community safe during the COVID-19 pandemic is whether their auto insurance rates are going up,” said Consumer Watchdog staff attorney Daniel L. Sternberg. “These are the very workers that can least afford to pay higher premiums, especially during the current COVID-19 pandemic.”
“The Commissioner needs to use his voter-enacted authority under Proposition 103 to protect Californians from unnecessary rate increases in the middle of a pandemic. Parked cars and grounded drivers cannot get into car accidents. Farmers and other auto insurance companies are pocketing the savings,” said Sternberg.
Low-income and minority drivers, many of whom are the first responders and emergency workers keeping us safe during the COVID-19 pandemic, are paying the highest rates at 7 of the top 10 insurance companies, including Farmers.
Farmers’ own data suggests that it could lower its present rates by 5–17% under the minimum permitted premium established by the Proposition 103 ratemaking formula.
Read Consumer Watchdog’s letter to the Commissioner here: https://consumerwatchdog.org/sites/default/files/2020-03/2020-03-30%20Ltr%20to%20Lara%20re%20Farmers%20Group%20Rates%20%28final%29.pdf
Farmers’ proposed rate increases are on top of another overall rate hike of 6.9% for all its customers that took effect barely three weeks ago on March 10, 2020. At the same time, Farmers proposes maintaining its unfairly discriminatory rate surcharges of up to 14% between groupings of its customers based solely on occupation. Under Farmers’ 3-tierd rating system, police officers, firefighters, and nurses in its “Business and Professional Group II” pay up to 7% more for their auto insurance than engineers and accountants in its “Business and Professional Group I.” All other Farmers customers, including those in lower wage occupations such as janitors, grocery clerks, delivery drivers, and warehouse workers, pay up to 14% more than engineers and accountants in Group I for all coverages combined, all other characteristics being equal.
Low-income drivers who can least afford it should not have to pay more based solely on their occupation, which has never been approved by regulation as a lawful rating factor under Proposition 103, said Consumer Watchdog. Farmers’ unfairly discriminatory 3-tiered occupational rating system means lower income and less-educated drivers continue to pay the highest premiums based solely on their occupation.
Farmers’ own rate analysis shows that its current rates are providing ample revenue – meaning another rate hike is not necessary. And that calculation does not take into account the windfall accruing to insurance companies every day that California motorists are sheltering in place and not driving their vehicles.
Under Proposition 103 if an insurance company seeks a rate increase that exceeds 7%, and the application is challenged by the public, the Department must hold a hearing. In its letter to the Commissioner, Consumer Watchdog said Farmers’ serial rate increase requests that fall just below the 7% threshold make it appear as if Farmers is gaming the rate application process in order to avoid a public hearing.
Consumer Watchdog and 10 community and civil rights organizations challenged auto insurers’ illegal and discriminatory use of job and education to set rates in February 2019. In September 2019, a Department of Insurance investigation confirmed those concerns, finding “wide socioeconomic disparities” created by insurance companies surcharging California drivers based on nothing more than their occupation or educational status. In December, the Department proposed rules to address this unfair discrimination. However, those rules have not yet been implemented.
The Department’s analysis of industry data shows that drivers in the highest per capita income ZIP codes are more than twice as likely to receive occupational-based discounts than drivers in the lowest per capita income ZIP codes; and only 29% of drivers in predominately minority ZIP codes receive such discounts as compared with 47% of drivers living in ZIP codes with a predominately white population. In addition, 75% of drivers in Underserved Communities as defined by Department of Insurance regulation do not receive these discounts.
Voter-approved Proposition 103 requires auto insurance premiums be based primarily on three mandatory factors – driving safety record, annual mileage, and years driving experience – and prohibits unfairly discriminatory rates. Proposition 103 prohibits this kind of unfair rate discrimination based on income or race.
SOURCE Consumer Watchdog
Adjusting to the New World of Agency
Steven White, NASFA VP of Marketing
This article originally appeared in The Mirror, Spring 2019, and is reprinted with permission of the National Association of State Farm Agents. ECRM is State Farm’s Electronic Customer Relationship Management Program.
I have visited with several agents recently. The same question comes up almost every time: “How are things going for you?” My response, “I guess it’s going okay,” seems to be the most fitting answer. I could give a more positive response, but it would not be honest. Is anyone really surprised by this? One agent told me it just wasn’t fun anymore. Our day-to-day activities are evolving rapidly, creating both challenges and uneasiness as we adjust.
I understand the concerns these agents have shared with me. How will all these changes ultimately impact our businesses and futures? IT appears that the biggest shift in this new world of Agency is our mindset. Agency has always been forced to deal with change, and every few years a new season of adjustment comes sweeping through. Some changes are positive, while others ended up in the “flavor of the month” trash bin.
Our corporate culture has been transformed and the evidence is everywhere. I’ve come to understand that when agents reminisce, “In the past, we…,” it means they miss their relationship with the company to which they dedicated their lives. They miss the company that valued agents as frontline underwriters and looked to agents as partners in growing the business. Sadly, this feeling of partnership no longer exists except in corporate talking points. I understand that change has occurred but many days I struggle to appreciate it. This era of change feels like a tidal wave, redefining our relationships to the company and even our policyholders. Rollouts of new applications are connecting the customer directly to the company and less to the agent. The most recent ECRM update video makes this abundantly clear. Our agency world has changed, and more changes are on the way.
As these new ways of doing things are rolled out, they often reveal a lack of preparation or worse, a lack of concern of the impact on agent’s offices. Too often, replacement processes are released into the field at large before the bugs are worked out. The new ECRM software has seen its share of required updates to work out the kinks. I acknowledge my limitations with technology and implementation, but the pilot programs should give an indication of the system’s readiness for mass distribution. Agencies must, and do, roll with whatever comes at us.
I am cautiously optimistic about the full implementation of this new ECRM operating system. Like many, I realize the road is going to be bumpy and frustrating, and present challenges for agency and operations alike. Here’s my question to anyone reading this article. Do you have any other options but to change and adjust to ECRM? If you do, please let me know so I may consider them. If not, my office will adapt to the ECRM world out of necessity. I am not sure what will be included with this next version, but I am fairly certain there will be many more incarnations to follow. I agree with those of you who have expressed frustration regarding training, or lack thereof, with ECRM rollouts. I had a fellow agent explain to me that personal assistance is for “SL approved” agents only, and the rest get videos or chars. She might be right.
My office is adjusting as needed and we are learning in every way available, mostly through trial and error. Here’s what I understand about ECRM. It is not going away and it’s not designed to help Agency. It is getting adapted to help the company control more aspects of information regarding our policyholders while connecting directly with them.
In late 2018, I found myself visiting with a man who had grown up, unbeknownst to me, in a SF agent home. He shared personal memories of the agency picnics, agent trips, and the family atmosphere surrounding everything involving the company. His face lit up with joy as he remembered the past. As he smiled and shar3ed a few of his favorite memories I found myself feeling a little bit envious of what he referred to as “the good old days.”
Yes, times change, yet seldom can the present compete with memories of the past. If you are struggling, hang in there and know there are many agents who feel the same. Who knows? Maybe it will turn out better than it feels right now. I am hoping it does for all involved.
Homeowner Security and Safety
You’ve all been there, your longtime client’s son or daughter is buying their first home and you are writing their homeowners policy. They may not think of it, so reminding them to change the locks, all the locks, might help them out. You never know who the previous owners lent or gave keys too not to mention during the sales process realtors, inspectors, potential buyers, and workmen are in and out of the house. Many times these individuals are allowed the use of the door keys unsupervised. (This covers outside doors, garage doors and shed doors. Changing the garage door opener code is also suggested)
What about calling the local police department for a home security inspection? Local law enforcement agencies will review your home’s security and make suggestions on where to make improvements.
Most neighborhoods have a neighborhood watch program. Inquiring about the program and becoming active in neighborhood and community activities will allow you to meet your neighbors and will give you an idea who belongs and who doesn’t.
Most thieves look for easy targets, so don’t help them. Install ample lighting around outside doors and cut back shrubs and trees from pathways. Don’t give that thief a place to hide. Keep garage and shed windows covered and locked. Don’t leave tools, extra bricks or toys in the yard. These can be used to break into your home.
All homeowners should know where the main water and gas supply shutoff valves are for their house. This knowledge could prove to be very important in the case of an emergency. Each plumbing fixture should have its own shut off valve as well.
If the new house is 1-1/2 or more story house are there 2 ways out from the upper floors in case of a fire? If the primary way is blocked by fire or smoke, you will need a second way out. A secondary route might be a window onto an adjacent roof or using an Underwriter’s Laboratory (UL) approved collapsible ladder for escape from an upper story window. Make sure that windows are not stuck and that the screens can be taken out quickly and security bars can be opened.
Make sure everyone can open all locks from the inside of your home. Replace inside-key locks with deadbolt locks that have a “Thumb Turn” instead or attach the door key so that it cannot be lost, but not seen or reached from a broken window. Have window locks that open from the inside and NEVER nail windows shut.