State Farm fined for failure to alert Oregon consumers of rights to a credit check

The Oregon Division of Financial Regulation fined State Farm $200,000 for failing to send notices over the past six years informing its insureds of their ability to request an annual credit check, which could affect their premiums.

Half of the total fine will be suspended and waived after three years if State Farm complies with all terms of the final order. The insurer self-reported the failure to DFR in July 2023, the final order states.

The case "serves as an important reminder that Oregon law allows consumers to request an annual rerate from their insurer, which could lead to lower premiums, but will not increase them," DFR said in a news release.

State Farm said that notices were not sent out due to a system error. Because of that error, the notification required by state law were not sent to customers purchasing new automobile insurance policies between Dec. 5, 2017, and Feb. 23, 2023.

Specifically, State Farm did not notify the affected consumers at the inception of their coverage that they may have received a lower rate if their credit history or the credit factors used in their credit-based insurance score were more favorable, and that they had the right to request a rerate of the policy no more than once annually, the release said.

State Farm notified the division that the issue was corrected on Feb. 23, 2023, for any customers purchasing new policies after that date.

As part of DFR’s final order, State Farm agreed to send a notification to all affected consumers who remain customers of State Farm, approximately 134,690 consumers. State Farm began sending notices on Jan. 2, 2024, through a mailing that is separate and apart from the annual policy renewal documents or any other communication.

The mailing also includes a statement that Oregon law requires State Farm to provide a notification to customers at the inception of the policy. All mailings must be completed no later than June 30, 2024, the release said.

Consumers are allowed to do a rerate once a year and if their credit improves, their insurance rates may as well. Rerating due to credit may result in either improving or no change to a consumer’s insurance costs, but will not negatively affect it.

“We commend State Farm for self-reporting this violation and taking steps to rectify the situation,” said Andrew R. Stolfi, Oregon’s insurance commissioner and DCBS director. “It is important that Oregon consumers know their rights. State law permits insurance companies to use an individual’s credit history to determine how much they pay for insurance, so it is critically important that consumers know they have the ability to lower their insurance premiums with positive credit.”

This report compiled by InsuranceNewsNet staff.