Farmers Insurance asks court to block state review of auto rates and a possible refund order | LA Times

The roots of the Farmers case are quite different, but ultimately involve the issue of whether the commissioner can order a retroactive rate cut or otherwise tinker with already approved rates.

The case started with a 2015 lawsuit brought by Farmers customers who alleged that the company had been illegally charging some customers more than others — a practice known as “price optimization” or “dynamic pricing.”

The idea is that if a customer is willing to pay more, they should be charged more, while customers more likely to shop around for the best deal should be charged less. That kind of pricing has been tried in a wide array of industries but it’s not allowed for California insurers. Rather, insurers can base their rates only on a handful of state-approved factors, such as a driver’s safety record.

The plaintiffs in the case, three Santa Barbara County residents, alleged that Farmers had been using the practice for years and had charged illegal rate increases that were not part of the Farmers insurance rates approved by the Department of Insurance.

Superior Court Judge Amy Hogue referred the case, which is seeking class-action status, to the department in 2016. She said the insurance regulator had primary jurisdiction and should review whether Farmers had in fact charged customers outside of the scope of its approved rates.

That’s what Farmers had wanted. But then, in June, the department said it would also review “whether Farmers engaged in any illegal conduct in formulating or implementing” its 2008 rates.

Harvey Rosenfield, the author of Proposition 103 and founder of Consumer Watchdog, said Farmers appears to be trying to block any meaningful investigation into whether it has engaged in illegal price optimization.

“Farmers is trying to stonewall the elected insurance commissioner to prevent the commissioner from getting to the bottom of what it’s doing in California,” he said.

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Farmers Insurance asks court to block state review of auto rates and a possible refund order – LA Times.