Farmers to Lower Car Insurance Rates for Some California Policyholders

Published: Wed 28 Jul 2010

Wendy Blair

California's largest car insurer, Farmers Insurance Group, announced on Tuesday that it will reduce its auto insurance rates by 14.5 percent on average for policies underwritten by the Farmers Insurance Exchange Subsidiary. Additionally, current owners of these policies will receive a one-time 10-percent rebate when they renew their coverage.

Farmers move brings the insurer into compliance with a 2006 state law that altered the way car insurance providers could determine their premiums, according to Mark Toohey, the senior vice president of Farmers.

The law compels car insurance companies to place more emphasis on the number of miles a vehicle is driven, the age of the vehicle, and the policyholder's driving record instead of where the vehicle is driven, he reported.

"If you live and drive in Bakersfield you're probably at a little less risk for an accident than the person who lives and drives in L.A.," said Toohey. "And we can continue to use the territory a car is driven in as a consideration in our rates, but it can't be weighted in the top three as it was before."

Rates for car insurance policies issued by L.A.-based Farmers Insurance Exchange will drop roughly 15.8 percent under the new premiums, according to the department of insurance in California. In Palm Springs, premiums will plummet approximately 16.4 percent, while they will drop about 6.1 percent in Bakersfield.

The ten-percent rebate is available to Farmers Insurance Exchange policyholders who renew their coverage between July 15, 2010 and January 15, 2011. The insurer said the rebates would average around $50.

The Farmers Insurance Group insures approximately two million vehicles in California, the California Department of Insurance said. That figure includes 640,000 vehicles insured by Farmers Insurance Exchange.

The insurer issues the majority of its Californian policies through a subsidiary known as Mid-Century Insurance Company, which lowered its rates in 2007 to comply with the new law.

"We first worked with the Department of Insurance to make sure Mid-Century was in compliance because that's where the bulk of our customers are," said Toohey. "Once we put that to bed we moved on to Farmers Insurance Exchange which is why this is being done now."