Poolman Fines Farmers Insurance $750,000 ~ Largest Action in State History ~
Posted on 6/28/2007
FOR IMMEDIATE RELEASE
Contact: Jim Poolman
June 28, 2007
Bismarck, ND - Insurance Commissioner Jim Poolman today announced that he has levied a $750,000 administrative penalty against the Farmers Insurance Group (Farmers), a major, national insurance company that annually writes around $19 million in property and casualty insurance premium in the state. The penalty comes as a result of findings contained in a market conduct exam that focused on auto claims handling of the Farmers Insurance Exchange.
Poolman said, "This action is a result of a comprehensive examination that uncovered systemic claims handling practices that were at best unfair and at worst, abusive to the policyholder."
The market conduct examination, which began in August 2004, reviewed Farmers' claims handling practices from January 1990 through August 1, 2004. The exam report describes incentive programs and slogans, such as the "Bring Back a Billion" campaign, which encouraged employees to work to rebuild surplus and utilized "pledges" that employees signed. Also detailed are company action plans that set goals that were unfair and arbitrary. For example, examiners found that company forms included goals that bodily injury claims be settled within a predetermined range rather than on each claim's merits. In addition, Farmers instituted a goal to close a set percentage of claims without payment.
The Department orders:
That Farmers eliminate all goals or incentive plans that utilize goals relating to settling claims within certain ranges in the evaluation of, determination of, compensation for, or the training of claims settlement persons. "Goals" means fixed targets and benchmarks which do not focus solely on the nature of the individual claims handled by the individual claims settlement personnel;
That Farmers emphasize in training programs for newly hired claims settlement personnel the importance of evaluating each claim on its own merit and neither underpaying nor overpaying claims;
That Farmers notify existing claims settlement personnel that the role of incentive programs is to reward exemplary performance and achievement of Farmers' goals, and that one of Farmers' goals is to pay the amount due on all claims as quickly, fairly and efficiently as possible.
"Farmers needed to reduce expenses and may have done so on the backs of their policyholders by requiring their adjustors to pay as little on claims as possible," Poolman said.