State Farm issues $13.3 million in refunds to overcharged Californians
News: 2017 Press Release
SACRAMENTO, Calif. — Insurance Commissioner Dave Jones announced today that State Farm has issued refunds totaling $13,335,701 for overcharged premiums to 241,356 California consumers—finally complying with the Commissioner's rate reduction order after losing twice in court.
The refunds with interest resulted from an order by Commissioner Jones that State Farm reduce its homeowners' and renters' rates by seven percent overall. Jones issued the order, which went into effect on December 8,2016, after an extensive public hearing and found that State Farm's rates were excessive. Instead of complying, State Farm sued the Commissioner and asked the court for a stay while State Farm challenges the order over the next year or years in court proceedings. The court denied State Farm's request to stall reducing its rates, and ruled that the Commissioner's rate reduction order should go into effect immediately. Even though State Farm lost the motion, the company still refused to comply with the order. The Department of Insurance filed a notice of noncompliance threatening an enforcement action, and State Farm again asked the court to intervene and block the notice of noncompliance. The court again rejected State Farm's request, and finally State Farm started complying with the Commissioner's rate reduction order, including issuing refunds with interest to policyholders overcharged since December 8.
"California voters gave me the responsibility under Proposition 103 to make sure that insurance companies do not charge consumers rates that are excessive," said Commissioner Jones. "Rather than reduce its excessive rates for its customers as ordered, State Farm chose to sue. We have used all our legal remedies to make sure State Farm's customers are not overcharged and to make sure that State Farm complies with the rate reduction order. It is past time that State Farm's rate payers receive the rate reductions to which they are entitled."
As a result of the lawsuit and delay, approximately 250,000 California consumers were charged excessive rates from approximately December8, 2016 through approximately mid-February 2017. Overcharged State Farm policyholders should receive an average savings of $54.92 per policy in refunds of overcharged premiums with interest.
The Commissioner and his staff are working to ensure that all consumers who were overcharged for their homeowners' premiums after December 8, 2016, receive a full refund or a credit as appropriate. Of those approximately 250,000 State Farm policyholders who were overcharged, 191,746 have received or should be receiving refund checks in the mail. Another 49,610 have elected to receive their refunds in the form of credits on their account with State Farm. Additionally, there are approximately 10,000 State Farm policyholders still owed refunds that State Farm says it is experiencing difficulty in contacting. Californians who bought or renewed homeowners' or renters' policies with State Farm after December 8, 2016 through approximately mid-February 2017 should check with their agent or contact State Farm directly at 1-800-782-8332 to see if they are owed a refund, or call the Department of Insurance at 1-800-927-4357.
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- The $13,335,701 refund amount includes $243,744 in interest at a rate of seven percent.
- In addition to ordering State Farm to reduce its rates as of December 8, 2016, the Commissioner also determined that State Farm's rates became excessive as of July 15, 2015, and ordered State Farm to issue refunds for excessive rates charged since that date. While the San Diego Superior Court denied State Farm's request for a stay to decrease its rates, the court did grant a partial stay to those refunds while it considers State Farm's legal challenges to the Commissioner's authority to require "retroactive" refunds. Proposition 103 authorizes the Commissioner to require refunds where there are excessive rates in effect.
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.