Farmers To Pay $390K For Charging Renters More Than Homeowners On Car Insurance

Image courtesy of Eric Norris

Last year, a Consumer Federation of America report found that home renters pay up to 47% more for car insurance than their peers who own their homes. Now, one state is doing something about this: Minnesota has fined insurance giant Farmers $390,000 for charging higher rates to renters. 

The Minnesota Department of Commerce announced this week that an investigation into Farmers Insurance Exchange’s pricing practices found the company illegally used customers’ residential status to influence their monthly rates.

Under Minnesota law, companies are prohibited from setting auto insurance rates or benefits, or denying coverage, based on a driver’s status as a residential tenant.

According to the Minnesota Department of Commerce, Farmers Insurance Exchange, which is a part of Farmers Insurance Group, charged some customers higher auto insurance rates solely because they were renters rather than homeowners.

The investigation also found that Farmers provided discounts to customers who have both homeowners and auto coverage policies with the company.

In all, the Department identified 1,620 Minnesota policyholders who were affected by the discriminatory pricing practices.

Paying Up

Under the consent order [PDF], Farmers agreed to refund the 1,620 customers  a total of $315,000 and pay a $75,000 penalty.

Additionally, the company must stop charging higher rates to renters, end discriminatory discounts that favored policyholders who have both homeowners and auto coverage over policyholders who have both renters and auto coverage.

“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 a statement. “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.”

CFA, which released the report on insurance surcharges last year, applauded the Minnesota action, but notes that other Commissioners should follow suit, noting that most states have similar laws against insurance discrimination.

“It is very encouraging to see Insurance Commissioners standing up for consumers by standing against unfair pricing in the insurance industry,” J. Robert Hunter, CFA’s Director of Insurance and former Texas Insurance Commissioner, said in a statement. “For the sake of hard-working Americans who are required to purchase auto insurance by laws in almost every state, we want to see more of this around the country.”