HomenewsreleaseInsurance Rate Regulation › Consumer Watchdog Files Suit To Require State Farm to Reduce Rates By Up To $100 Million To Prevent Homeowners Insurance Overcharges

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Consumer Watchdog Files Suit To Require State Farm to Reduce Rates By Up To $100 Million To Prevent Homeowners Insurance Overcharges

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Carmen Balber & Jonathan Phenix

Santa Monica, CA – Consumer Watchdog filed a petition challenging State Farm’s proposed rates for its dwelling insurance, charging that California’s largest homeowners insurer will be overcharging over 280,000 policyholders unless it cuts its rate by as much as 40%, or nearly $100 million.

Consumer Watchdog’s analysis found that State Farm overestimated claims costs and improperly sought exceptions to the rule against excessive rates, resulting in an excessive rate proposal.

“Insurers like State Farm can’t get around Proposition 103 by proposing only partial rate decreases,” said Jonathan Phenix, a staff attorney at Consumer Watchdog. “State Farm is lowballing the rate reductions it owes its homeowners’ insurance customers and cannot justify nearly $100 million in excessive rates.”

Proposition 103 is California’s voter-approved insurance reform law that bars excessive home, auto and business insurance rates and requires insurance companies to justify their rates through a public application process before they take effect.  The law prevents excessive rate increases and also requires insurance companies to reduce their rates when existing rates are excessive.

In this case, State Farm filed for an overall rate decrease of -26%. However, the insurance company’s own data shows that an overall rate decrease of at least -40% is warranted. Consumer Watchdog’s petition alleges that State Farm’s rate decrease proposal does not go far enough and would result in an excessive rate.

Consumer Watchdog is currently challenging two other excessive rate proposals by State Farm. One of these legal challenges involves State Farm’s proposal to increase the commercial multi-peril insurance rates paid by small businesses by about $6.5 million. In the other legal challenge, State Farm recently submitted legal briefing arguing that being forced to reduce homeowners insurance rates would deprive the company of its constitutional rights, despite the undisputed fact that the company has made billions of dollars in profits. The judge’s decision in this case, which applies to traditional homeowners insurance that covers both the home and, unlike dwelling insurance, the contents of a home, is expected to be made public by August 8, 2016.

Consumer Watchdog is a non-profit non-partisan organization.  It has used the public participation process under Proposition 103 to save auto, home and medical malpractice insurance policyholders over $3 billion since 2003. Proposition 103 has saved motorists alone over $100 billion since its passage in 1988, according to a 2013 report by the Consumer Federation of America.

To learn more about Proposition 103, visit: http://www.consumerwatchdog.org/focusarea/prop-103-california-insurance-reform

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