Farmers plans to cut rates for homeowners
SACRAMENTO -- Farmers Insurance Group is planning to cut rates on homeowner’s insurance by 12% to 15% for most of its 1.3 million California customers, saving them an estimated $171 million annually.
A Farmers spokesman said the reductions could be made because of favorable market conditions. With few major disasters in the state recently, damage claims have been relatively low.
In June, the state Department of Insurance ordered Farmers and three other insurers to lower their rates, citing the reduction in claims. Of these insurers, State Farm General and Safeco subsequently agreed to rate reductions.
The other company, Allstate, has asked the state to raise its rates, saying it needs to build reserves to be able to pay claims in the event of a natural disaster.
Farmers said its proposed premium reductions should benefit about 1 million of its 1.3 million customers, including those with renter’s policies. Of those customers who get rate reductions, premiums will be reduced from 12% to 15%, depending on the type of policy they have.
The proposed rate reduction must be approved by the Department of Insurance.
Farmers also said it was launching a “claims forgiveness” policy for some customers. The crux of it: If you have a claim with Farmers, the company promises not to hike your rates as a result if you haven’t had a prior claim in the preceding six years.
“When we looked at our long-term customers, we felt we needed to reward them for being claims-free,” said Jerry Davies, Farmers’ director of media relations.
Last summer the company also launched a policy, called “next generation,” that provides enhanced coverage to preferred-risk customers. That policy was issued at a discount to the company’s normal rates, Davies said.
Douglas Heller, executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica, reacted cautiously to Farmers’ proposal.
“We want to make sure this happens quickly but happens right,” he said. “The problem is they have been drastically overcharging us in the last few years.”
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Lifsher reported from Sacramento and Kristof from Los Angeles.
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