Farmers Gouges Its Most Loyal Clients, Class Says

     LOS ANGELES (CN) – Though the law requires it to calculate rates based on risk factors, Farmers Insurance Exchange instead focuses on what policyholders will pay, a class claims in court.
     Roger Harris, Duane Brown and Brian Lindsey filed the complaint on April 22 in Los Angeles County Superior Court against Farmers and its affiliate, Mid Century Insurance Co.
     “Auto insurance companies are not permitted to determine auto insurance rates on the basis of what the market will bear,” the complaint states.
     Farmers should calculate its rates “based on the risk presented by the policyholder,” the class claims, but its rating methodologies are instead based on “the policyholder’s willingness to tolerate a price increase.”
     The class says such “non-risk-based pricing,” or NRBP, aims to “increase rates for policyholders willing to pay more than they would based on the risk they present.”
     “NRBP harms policyholders who defendants judge to be less price-sensitive and more loyal to defendants – they pay more than they would pay if defendants used only risk-based factors,” the complaint states.
     The class says Farmers has data indicating that “people with certain (non-risk-based) characteristics are willing to pay more than they should pay based on the risk they present.”
     “The data indicates, among other things, that their most loyal customers are willing to pay more than new customers who present the same risk,” the complaint states.
     Farmers allegedly omits its consideration of such “elasticity of demand” from its marketing materials.
     Claiming that they have paid higher prices for their insurance than other insureds who present the same risk that they present, the plaintiffs want to represent a class of similarly situated insureds against Farmers under California’s unfair-competition law and its insurance code.
     The complaint describes all three named plaintiffs as Santa Barbara County residents and loyal customers of the defendants.
     Los Angeles-based Farmers is “the largest auto insurer in California,” according to the complaint.
     The class seeks damages, restitution and an injunction. It is represented by Dan Stormer with Hadsell Stormer & Renick of Pasadena.

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