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| | 1/5/2009 10:18:05 PM |
Austin, Texas - The Texas Department of Insurance on Tuesday ordered Farmers Insurance to stop what the state labeled unfair pricing practices, a move the department says effectively freezes the company's homeowners rates.
The department also said it would seek restitution for Farmers' customers who have been overcharged because of the company's "illegal rating prices."
"This cease and desist order is a necessary step to stop unfair and illegal activity by Farmers Insurance," Insurance Commissioner Jose Montemayor said. "Farmers' own actions have forced this extraordinary step."
The order by the insurance department gives the company, the state's second-largest homeowner insurer, 90 days to remedy what the department says are unfair pricing practices. Farmers Insurance Exchange and Fire Insurance Exchange, identified as Farmers in the order, can still renew and sell policies but must have a new pricing structure enacted at the end of the 90 days.
If a plan is not enacted, the company will be in violation of the law and the department will seek an additional $25,000 per every individual harmed, department spokesman Robert Black said.
Farmers has denied any wrongdoing and spokesman Bill Miller said Montemayor's actions are a "mere image of the governor's, whose motivation was strictly political."
"In effect, Farmers has become the commissioner's personal political punching bag and it is terrible disservice to our policyholders, our employees and frankly everyone in Texas," Miller said.
Black said the department is not talking about politics, but talking about protecting consumers.
The state sued Farmers last week, accusing the insurance company of charging consumers excessive and unjustified rates for homeowners' coverage through deceptive trade and discriminatory practices.
Farmers historically has had a customer base of about 700,000 homeowners in Texas and this year it has added about 50,000 homeowners.
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