Farmers Refunds $15 Million Overcharge
NU Online News Service, April 15, 3:40 p.m. EST?Farmers Insurance Group has agreed to refund about $15 million to automobile policyholders it overcharged, the Texas Insurance Department announced.
The arrangement ends a dispute centered on the overpayment of surcharges by Farmers automobile insurance customers who had been involved in at-fault traffic accidents.
Under a consent order, Los Angeles-based Farmers must pay back the customers about $10.6 million plus 10 percent interest per year for overcharges going back to 1991, the insurance department said.
Additionally, Farmers must pay $100,000 of a $500,000 fine imposed by Insurance Commissioner Jos? Montemayor. The commissioner agreed to waive $400,000 of the fine because Farmers itself had reported the surcharge problem to the Insurance Department in August 2000.
Under Texas law, insurers must levy surcharges for no more than three years against policyholders who have caused traffic accidents.
The consent order refers to nearly 262,000 cases in which policyholders were surcharged too long for accidents between 1991 and 2001, when Farmers fully implemented an automated system for removing surcharges.
The order blamed the failure to remove all surcharges as they expired on Farmers' former manual system of removing driving surcharges.
The dispute between Farmers and the insurance department involved the amounts of the restitution and the penalty.
Mr. Montemayor said he was pleased to have reached the settlement, which avoids a protracted hearing and delays in the refunds to policyholders.
Farmers sells auto insurance in Texas through Mid-Century Insurance Co. of Texas, Texas Farmers Insurance Co. and Farmers Texas County Mutual Insurance Co.
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