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Farmers Maintains New-Policy Freeze in Battle With State

November 03, 1994|From Times Staff and Wire Reports

The head of Farmers Insurance Group's British parent company said Wednesday that Farmers will not lift its current freeze on writing new homeowners and earthquake insurance in California "until we get our way"--that is, until Farmers is allowed to raise its earthquake policy deductibles to 25%.

Martin Broughton, chief executive of BAT Industries, made the remark in an interview with public television's "Nightly Business Report."

California Insurance Commissioner John Garamendi opposes the deductible increase, which Farmers unilaterally began imposing on renewal customers last summer. The company contends it has the authority to raise the deductible under a rate filing approved years ago.

An Insurance Department administrative law judge held hearings on the issue in early September but has not issued a decision.

Without the increase, Broughton said, "there's no way we're going to be writing any new business" in California.

Citing industrywide losses of $10 billion or more from the Jan. 17 Northridge earthquake, nearly all of the state's largest insurers have restricted their writings of homeowners and earthquake coverage.

Broughton, in a separate interview Wednesday with Dow Jones Investor Network, said he thinks Farmers' current quake loss estimate of $1.35 billion "is actually slightly optimistic because we are now seeing quite a few reopenings of what we thought were closed cases."

A Farmers spokesman said the estimate is being reviewed as claims are paid and that there is a chance it could be revised upward.

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