Alameda County DA sues Farmers Insurance over ‘widespread scheme’ to underinsure homes [Bay Area News Group]
Price has accused Farmers and multiple affiliated companies of lowballing homeowners on the cost estimates to rebuild their properties — meaning policyholders lack enough coverage to replace their homes in the event of a wildfire or other disaster.
The carriers make up 15% of the state home insurance market, according to the DA’s office. It was unclear how many
Price, who’s facing a recall campaign in response to growing crime concerns, said the lawsuit aims to ensure the companies offer fair and accurate replacement cost estimates so homeowners can make informed decisions when buying a policy. The complaint also seeks civil penalties of up to
“The relationship between an insurer and the homeowner is necessarily one of unequal knowledge, expertise, information, and bargaining power, with homeowners depending on the insurance company to act in good faith,” Price said in a statement this week.
Farmers called the allegations “simply incorrect” and maintained it does not seek to provide low replacement cost estimates.
“We intend to discuss this with the DA’s office,” the company said in a statement. “We look forward to addressing these concerns and defending our position.”
The complaint against Farmers, filed last month in
In addition to Farmers, the complaint names the
The lawsuit comes amid increasing turmoil in California’s insurance market as insurance providers, citing more frequent catastrophic wildfires, have ended coverage for tens of thousands of homeowners in fire-risk areas, including the
To quell the unrest, state regulators have embarked on a yearlong overhaul of home insurance rules and pricing. The goal is to allow providers more latitude to raise premiums to account for the threat of climate change while extracting commitments to extend coverage in fire-risk areas.
The
Price said she hopes to help level the playing for homebuyers by forcing Farmers to consider more factors about a “home’s actual features and characteristics” when determining replacement estimates instead of “some hypothetical home that suits the insurance company’s bottom line.”
Price took aim at the software that companies use to calculate the estimates, alleging it relies mainly on general information like a property’s zip code. Her office alleged using the software to generate lower cost estimates saved the companies
The consumer advocacy group Consumer Watchdog, a frequent critic of the insurance industry’s use of algorithms to set premiums and policies, said it was “glad to see insurance companies’ unchecked use of big data and claims technology get a closer look.”
But
Related Articles
She added, however, that when homeowners renew their policies, the plans don’t always fully account for increases in construction costs. She said insurance companies, agents and homeowners all bear some responsibility for knowing the risk and updating coverage if needed. Construction costs have soared in recent years amid inflation, material and labor shortages and supply chain issues.
This is the second time Price has sued a major insurance company. Last month, she filed suits making similar claims against auto insurers, including Progressive and the
©2024 MediaNews Group, Inc. Visit at mercurynews.com. Distributed by Tribune Content Agency, LLC.
Insurance Entrepreneur Dan Garzella’s Committed to Fostering Professional Growth of his Employees
CT doctor gets prison for health care fraud. He sold $1M+ in drugs, wanted to ‘hire a hitman’ [Hartford Courant]
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News