Garamendi, Farmers swap ratings gripes.

Garamendi, Farmers swap ratings gripes 

Farmers Insurance Group charged last week that the Department of Insurance manipulated customer grievance statistics in order to single it out for criticism in a survey of complaints against California insurers.

"I think they are making an example of one of the large companies," said Jerry Clemans, a spokesman for Los Angeles-based Farmers Insurance, the largest property/casualty insurer in the state. "I think what's being done is that if you can show what a large company is supposed to be doing, the other (smaller) companies will be a little more timid in standing their ground (on other issues)."

Clemans said the number of complaints against the company is statistically insignificant compared to the number of overall policies. He also charged that California Department of Insurance Commissioner John Garamendi emphasized the poor performance of Farmers smallest subsidiary, while paying little attention to other Farmers' subsidiaries that faired much better in the survey.

A Garamendi spokesman said the ranking was valid and the company should work on improving its rating.

"The commissioner singled out Farmers because the squeaky wheel needs the grease," said spokesman Bill Schulz. "Clearly Farmers will work to improve their record, squeak less and hopefully require less grease next year. Instead of complaining about their high level of complaints, they ought to fix the problems."

Garamendi last week spotlighted Farmers Insurance Group's auto insurance operation in California, tagging it as having the highest rates of justified complaints by policyholders to the California Department of Insurance in 1990.

Of the top 10 auto insurers in the state, the rate of justified complaints was 64.7 percent higher at Farmers Insurance subsidiaries Farmers Insurance Exchange and Mid-Century Insurance than at the average of the other largest eight companies, said Garamendi.

However, Farmers Insurance's primary auto insurance subsidiary ranked only 20th worst of 50 total companies ranked, as measured by justified complaints against $1 million in premiums. One large auto insurer, Mercury Insurance of Los Angeles, received a worse rating than both of Farmer's auto subsidiaries in the ranking.

Garamendi also said a Farmer's homeowners insurance subsidiary, Farmers Insurance Exchange, ranked as the worst company for complaints in the homeowners insurance category, "with a complaint ratio five times higher than the survey average."

Garamendi, playing off the title of a Clint Eastern Western, said in the record of complaints against auto insurers "the story is the good, the bad and the ugly. . . . The bad was Farmers Insurance Group. While they advertise that |America depends on Farmers,' too often Farmers customers must depend upon the Department of Insurance to get their claims paid and their rates reduced."

One analyst, agreeing with Clemans that Farmers was unfairly singled out, said Garamendi was punishing the company because it is a leader in legal efforts to prevent rate rollbacks and fixed profit margins for insurers approved by 1988 ballot initiative Proposition 103.

"Farmers is notoriously uncooperative with the Department of Insurance," said the source, who requested anonymity. "I think Garamendi's clearly manipulating the data here, saying, |If you don't cooperate with us, we'll hit you in other forms.'"

Schulz denied any linkage: "It doesn't jibe because USAA (the auto insurer with the lowest complaint ratio) has an outstanding record of service to consumer. They are also among the toughest critics of Garamendi on (Proposition) 103 and the commissioner congratulated them for their outstanding record."

Farmers spokesman John Millen said it was unfair for Garamendi to cite Farmer's Insurance Exchange as the worst property/casualty company, when another Farmer's Insurance subsidiary, Fire Insurance Exchange, which is 13 times larger than the first in 1989 premiums, was ranked 19th best of a total of 50 companies in the homeowner's category.

Millen also said the number of complaints was insignificant for a company of its size.

Farmers Insurance Exchange had 521 justified complaints by automobile policyholders and 28 by homeowners insurance policyholder, while Mid-Century Insurance had 110 complaints by auto Insurance policyholders, according to Department of Insurance records.

Farmer's said compared to the total number of policies written by the company, the complaints represent 0.00006 percent of homeowners policies and 0.00028 percent of automobile policies and are statistically meaningless.

Millen also said companies should have been ranked by complaints against the number of claims, not premiums, though other industry sources noted technical difficulties in that approach.