This story is reprinted with permission from FC&&S Legal, the industry's only comprehensive digital resource designed for insurance coverage law professionals. Visit the website to subscribe.
An insurance company has agreed to pay a $75,000 penalty and to refund $315,000 to more than 1,600 Minnesota drivers who were charged higher auto insurance rates solely because they were renters rather than homeowners.
"You should not be forced to buy a house in order to get a fair price on your auto insurance," Minnesota Commerce Commissioner Mike Rothman said in announcing the settlement. "It is not only unfair, but in Minnesota it is also illegal for an insurance company to charge more or discriminate against drivers simply because they happen to rent their homes."
Minnesota law specifically prohibits companies from setting auto insurance rates or benefits, or denying coverage, based on a driver's status as a residential tenant.
The Commerce Department's enforcement action was against Farmers Insurance Exchange, part of Farmers Insurance Group.
According to the consent order, a Commerce Department market conduct examination of Farmers Insurance Exchange's pricing practices discovered that the company was using a driver's status as a residential tenant in offering or establishing its rates and discounts for auto insurance.
Refunds & credits with interest
As a result of the Commerce Department inquiry, the company identified 1,620 Minnesota policyholders who were affected by this pricing practice and it agreed to issue refunds and credits with interest to these policyholders, totaling $315,317.
In addition to the consumer refunds and $75,000 penalty, the company must cease and desist from violating the Minnesota law that prohibits charging higher rates to renters. The company also agreed to end discounts that favored policyholders who had both homeowners and auto coverage over policyholders who had both renters and auto coverage.
"Commissioner Rothman was right to take action and speak out against unfair auto insurance pricing. It is critical that he and commissioners around the country make it clear that auto insurance prices must be based on real risk factors and not personal or economic characteristics such as whether or not you can afford to buy a home," said J. Robert Hunter, the director of insurance for the Consumer Federation of America ("CFA") and a former insurance commissioner of Texas.
Steven A. Meyerowitz, Esq., is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. Email him at smeyerowitz@meyerowitzcommunications.com.
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