Farmers Insurance Refunds: Policyholder Perks Or Publicity Stunt?

Farmers Insurance has a long history of giving back to their communities and employees. Since its founding, Farmers Insurance has strived to put people first, and this is reflected in their corporate social responsibility efforts. The company has donated over $39.1 million to support various causes and has a strong commitment to diversity, equity, inclusion, and belonging. In addition, Farmers Insurance has provided over $4 million in grants to support employees facing financial hardships through the Farmers Family Fund. Furthermore, the company has been known to give back money to its customers when necessary. In 2024, Farmers Insurance refunded $1.4 million to California homeowners and paid a $2 million fine for improperly using policyholders' claims history to raise rates or cancel policies. This settlement addressed practices known as use it and lose it, demonstrating Farmers Insurance's commitment to treating its customers fairly.

Farmers Insurance refunded $1.4 million to California homeowners

Farmers Insurance has refunded $1.4 million to California homeowners and will pay a $2 million fine for improperly using policyholders' claims history to raise rates or cancel policies for some homeowners. The settlement, which required Farmers to issue at least $1.4 million in refunds and change its practices, is the result of legal action brought by the Department of Insurance in 2003 against Farmers for practices that have become known as "use it and lose it".

The probe, which was triggered by consumer complaints, found that Farmers lacked the proper guidelines to determine whether to renew a policyholder based on the number of times that person filed a claim. Such a guideline is needed to prevent "use it and lose it", a practice that regulators said had led many Californians to lose homeowners insurance after filing legitimate damage claims on their houses.

Farmers denied any wrongdoing, saying a computer error caused the company to overcharge 6,000 customers. "We caught it when they caught it," said Farmers spokesman Jerry Davies. "We fixed the computer system four years ago, all the customers were paid and have received apologies."

As part of the settlement, Farmers agreed to work with the department to develop better guidelines to assess a home's fire risk and determine whether or not to cancel policies. The settlement also requires Farmers to develop objective, specific rating and renewal guidelines that comply with the Insurance Code and the Insurance Commissioner's regulations.

The company paid a $2 million fine for using policyholders' claims history to raise rates

In 2024, Farmers Insurance was fined $2 million for improperly using policyholders' claims history to raise rates or cancel the policies of some homeowners. The settlement, which was the result of legal action brought by the Department of Insurance in 2003, required Farmers to issue at least $1.4 million in refunds and change its practices. The company was found to have been indiscriminately applying its own internal rating guidelines, resulting in unfair surcharges or non-renewals for some customers. This included customers who had made claims that were never paid by Farmers because they fell within the policyholder's deductible or were paid by another insurer.

The settlement also required Farmers to develop objective and specific rating and renewal guidelines that comply with the Insurance Code and the Insurance Commissioner's regulations. The company was also required to maintain and provide detailed documentation to justify any decision to non-renew a policyholder. In addition, Farmers had to conduct an analysis of its computer data to find and refund any policyholders who were incorrectly surcharged due to claims without payment or inquiries that never resulted in a claim or payment.

The Foundation for Taxpayer and Consumer Rights (FTCR), a consumer watchdog group, urged all Farmers homeowners insurance customers to review their premiums from 2003 to 2007 and contact the group if they faced unexplained rate hikes or believed they were inappropriately denied renewal. FTCR's litigation director, Pam Pressley, stated that "Farmers was overcharging its customers and California law gives the Insurance Commissioner and citizens the power to enforce the rules and get people their money back."

This incident was not the first time Farmers had violated the law. The company had previously been sued for surcharging motorists in violation of Proposition 103, a voter-approved initiative that mandated rate protections for policyholders. Farmers had also been sued for charging excessive and unlawful fees for its policyholders, including fees in connection with paying for auto insurance on an installment basis. In addition, in 2006, FTCR challenged Farmers' homeowners insurance rates and helped secure a $171 million decrease in rates for California customers by demonstrating that the existing rates were excessive.

Farmers Insurance has a strong commitment to diversity, equity, inclusion and belonging

Farmers Insurance has a longstanding commitment to diversity, equity, inclusion and belonging (DEI&B). This commitment is foundational to its culture and guides the organisation in its mission to make a positive difference in the communities where its employees live and work.

Farmers Insurance recognises that to meet its goal of being the leader in innovating for customers whenever and wherever, it must value and celebrate the unique potential of every individual person. It encourages new ideas, questions the status quo, and puts the customer at the heart of what it does. Through workplace and corporate citizenship initiatives, Farmers continues to focus on achieving its vision for DEI&B by embracing workforce diversity and the differences that make it stronger, nurturing an accepting and inclusive culture where employees feel a sense of belonging, and supporting programs that work to eliminate financial barriers for low-to-moderate-income communities.

Farmers Insurance has a vibrant network of Employee Resource Groups (ERGs) that are led by employees and open to all. These ERGs strive to support employees in bringing their whole selves to work. There are nine active and engaged Farmers ERGs across the country.

Farmers Insurance is also committed to giving back to the communities it serves. Through a strategic focus on economic empowerment and disaster resilience, Farmers supports worthy causes and works with a variety of nonprofit and other organisations that share its values and vision for meaningful community engagement.

As part of its commitment to DEI&B, Farmers Insurance is a signatory of CEO Action for Diversity & InclusionTM, the largest business-led initiative to advance diversity, equity and inclusion in the workplace. As part of this commitment, Farmers pledges to cultivate a workplace where diverse perspectives and experiences are welcomed and respected, and where employees feel comfortable and encouraged to discuss diversity, equity, inclusion, and belonging topics.

Farmers Insurance also recognises the value that different backgrounds, perspectives and points of view of its employees, customers, suppliers, and agents bring to the company, and believes that diversity makes it stronger. Its supplier diversity efforts are an extension of its core values and overall commitment to inclusion and diversity. Developing and sustaining relationships with diverse suppliers is important to Farmers Insurance, and it seeks to provide opportunities for traditionally underrepresented businesses in its procurement efforts where possible.

The company provides philanthropic support to communities affected by natural disasters

Farmers Insurance has a long history of giving back to communities affected by natural disasters. The company was recognised with the Insurance Industry Charitable Foundation's Golden Horizon Award for its notable efforts in helping rebuild communities in Joplin, Missouri, and Sea Bright, New Jersey, following devastating weather events.

Farmers Insurance has also been dedicated to helping communities prepare for, respond to, and recover from disasters. The company led the creation of the Disaster Recovery Playbook, which compiles best practices for municipalities and communities to follow in the event of a disaster. In addition, Farmers Insurance has donated thousands of volunteer hours and made financial contributions to support recovery efforts.

The company's philanthropic efforts are focused on disaster resilience, and they work with nonprofit partners to help communities plan and prepare for natural disasters and rebuild more sustainably and resiliently in the aftermath. They also set up giving campaigns to make it easy for employees to contribute to nonprofits working on disaster relief and, in some cases, match employee donations.

Farmers Insurance has also partnered with Team Rubicon, a veteran-led global disaster response organisation, since 2015. The company awarded the organisation a $1 million grant to support its emergency response, long-term disaster recovery, and COVID-19 vaccine accessibility efforts. This partnership is in line with Farmers Insurance's philanthropic focus on disaster resilience.

Farmers Insurance supports financial literacy and career development programs

Farmers Insurance has a long history of giving back to communities and supporting others. The company's social responsibility efforts are centred around giving back, serving others, and making a positive impact. Economic empowerment is a key focus, with Farmers supporting programs that promote financial literacy and career development, particularly in low-to-moderate-income communities.

Economic Empowerment Initiatives:

• Career Development and Readiness: Farmers Insurance recognizes the importance of career development and readiness programs in empowering individuals to achieve financial success. They work with organizations to provide resources and opportunities that help individuals develop professionally and build rewarding careers.
• Financial Literacy and Funding Programs: Farmers understands that financial literacy is a crucial aspect of economic empowerment. They collaborate with partners to deliver financial education, helping individuals make informed decisions about their money and plan for the future.
• Introducing Risk and Insurance at a Younger Age: The company promotes financial readiness by advocating for insurance education at an early age. They aim to connect the dots between financial preparedness and being ready for unexpected life events.

Strategic Partnerships:

• SBP: Farmers Insurance partners with SBP, an organization dedicated to reducing the time between disaster and recovery. SBP takes a holistic approach by preparing at-risk communities, responding to immediate needs after a disaster, and helping communities rebuild promptly and efficiently. In 2023, SBP's efforts reached over 9.7 million individuals in high-risk areas, equipping them with the tools to prepare for and recover from disasters.
• Operation BBQ Relief: Farmers works with Operation BBQ Relief, a nonprofit organization that provides hot barbecue meals to communities affected by disasters. This partnership addresses food insecurity and provides comfort to those in need, including first responders and relief workers.
• Junior Achievement USA: As the nation's largest organization focused on economic empowerment for young people, Junior Achievement USA prepares students for economic success and helps them make smart academic and financial choices. Farmers employees volunteer with Junior Achievement, sharing their knowledge and experiences to inspire the next generation.

By supporting these initiatives and partnering with organizations that share their values, Farmers Insurance demonstrates its commitment to financial literacy and career development, empowering individuals and communities to build a brighter future.

Frequently asked questions