California's largest auto insurer, Farmers Insurance Group, announced Tuesday that it was reducing its rates by an average of 14.5% for policies issued by its Farmers Insurance Exchange subsidiary. Also, current holders of those policies will get a one-time 10% rebate when they renew them.
The move, announced Tuesday, puts the company in compliance with a state law passed in 2006 that changed the way auto insurance providers could calculate their rates, said Mark Toohey, Farmers' senior vice president.
The law requires auto insurance companies to put more emphasis on the age of a car, how many miles it's driven and the customer's driving record as opposed to where a car is driven, he said.
FOR THE RECORD:
An article in Business on Wednesday misstated the primary factors in rating auto insurance customers. The three primary factors are driving record, annual mileage driven and number of years of driving experience.
"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.," Toohey said. "And we can continue to use the territory a car is driven in as a consideration in our rates, but it cant be weighted in the top three as it was before."
Premiums for policies issued by Farmers Insurance Exchange in Los Angeles will decline about 15.8% under the new rates, according to the California Department of Insurance. In Palm Springs rates will drop about 16.4%, while in Bakersfield they'll go down only about 6.1%.
The 10% rebate applies to Farmers Insurance Exchange customers who renew their policies between July 15, 2010, and Jan. 15, 2011. The company said the average rebate would be about $50.
Farmers Insurance Group insures about 2 million vehicles in California, according to the Department of Insurance. That includes about 640,000 with Farmers Insurance Exchange.
The company issues most of its policies in California through its Mid-Century Insurance Co. subsidiary, which reduced rates in 2007 to comply with the 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," Toohey said. "Once we put that to bed we moved on to Farmers Insurance Exchange which is why this is being done now."