Farmers Insurance Exchange has unfairly profited from the COVID-19 pandemic by failing to adequately refund excess premiums paid by California drivers from mid-March through April 2020, when stay-at-home orders dramatically reduced the number of vehicles and accidents on the road.
The 15-page case alleges insurers such as Farmers have “scored a windfall” by issuing “woefully inadequate” refunds to customers who overpaid for their insurance at the onset of the COVID-19 pandemic. Although Farmers issued to policyholders a 25 percent credit for April 2020 premiums and a 15 percent credit for premiums for the following month, the company has declined to issue any other credits or refunds and instead unfairly retained the excess amounts paid by drivers, the lawsuit claims.
According to the complaint, the auto industry “almost uniformly” benefited from the COVID-19 pandemic, as companies continued to collect regular monthly premiums despite there being fewer cars on the road, fewer accidents and fewer insurance claims. The lawsuit, citing cell phone location data, relays that the number of miles traveled by California drivers dropped by a little more than 50 percent in mid-March 2020 all the way to nearly 80 percent in early April before ticking back up again slightly to around 70 percent toward the end of the month:
Upon information and belief, decreases in miles traveled continued through the end of 2020 and well into 2021, the suit adds. With the steep drop in accident numbers, insurers such as Farmers have been able to profit unfairly off of their customers, in particular given auto insurance rates are calculated to cover claims and expenses expected to occur in the future, the case says.
According to the lawsuit, conservative calculations by the Center for Economic Justice and the Consumer Federation of America on car accident data indicate that at least a 30 percent minimum average premium refund would be required to correct the windfall insurers have secured from mid-March through the end of April 2020. Farmers, at all relevant times, has “been aware of the need to refund premiums” in order to course-correct its early-pandemic earnings from California policyholders yet has intentionally failed to do so, the case charges.
The plaintiff, a Farmers policyholder since 2018, received a premium credit of $25.88 from the defendant last April and a credit of $15.53 last May, the suit says, alleging the consumer renewed his policy with the defendant based on its failure to disclose the excess profits it gained because of the COVID-19 pandemic “and the fact that its premiums are not based on an accurate assessment of risk” during that time.
The lawsuit looks to cover all California residents who purchased personal automobile insurance from Farmers covering any portion of the time period from March 1, 2020 to the present.
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