Farmers Insurance Group was founded 80 years ago as a customer service oriented company. But in 2011 MSN Money-Zogby poll, over 29% called Farmers’ customer service poor. Further inquiry reveals Farmers drops customers, refuses claims, and employs unresponsive adjusters. State of Washington Insurance regulators intervened with Farmers Insurance refused a claim because an at fault driver had road rage.

Farmers Insurance declined to respond specific polling results, sent a written statement in which it questioned its inclusion in the survey because the Farmers brand has exclusive agents in only 30 out of 50 states. The Farmers Insurance Group has different affiliations to distribute insurance, under different names, like 21st Century Insurance.

Farmers is the 3rd biggest home / auto insurer in the US, with over 20 million policies Nationwide. They are now owned by Zurich Financial in Switzerland.

In 2007, Farmers Insurance filed a request from the state of California to raise its rates because they improved rankings at J.D. Power from “below average” to “slightly above average” over the last 3 years.

After the California Department of Insurance denied the company’s rate increase request, the JD Power ranking dropped substantially. Farmers posted profit over over $1 billion in 2010.

Today there is literally nothing you can’t do from your smart phone that you could do on the web. With major auto insurers offering customer interfaces, a policyholder can get quotes, make changes, eliminate coverage, bill pay, ask questions, make claims, IM their agent, really the uses are endless.

The most active Auto Insurance companies using apps today for their customers are State Farm, Allstate, GEICO, and Progressive. These carriers offer multiple platforms for their apps, so almost any kind of smart phone can use their software (i.e. mobile site, iPhone, Android, etc.).

Allstate has their Mobileapp, GEICO markets their GloveBox app, Progressive, and State Farm their Pocket Agent.™ Within a year about 50% of phones will be smart phones. So we are getting into a new and exciting territory for handheld computers / smart phones.

By Jeff Jeffrey

Metropolitan Direct Property and Casualty Insurance Co. has withdrawn its request for a 5.8% increase to its automobile insurance rates in California after a consumer advocacy organization challenged the filing. Consumer Watchdog, the California-based organization that challenged the rate request, estimated the rate increase would have generated $6 million for Metropolitan Direct.

If the rate request had been approved, it would have affected roughly 78,000 California drivers. Metropolitan Direct is a subsidiary of MetLife Auto & Home Group.

Todd Foreman, a staff attorney at Consumer Watchdog, who led the organization’s challenge, said his organization had concerns with how some of the data Metropolitan Direct included in its filing were presented. He said the company did not properly include data on loss trends and the data that were included had “considerable inconsistencies.”

“The Department of Insurance granted our request to intervene, and two days later the company withdrew its application for a rate increase,” Foreman said. “It was definitely a victory for Consumer Watchdog and for consumers in California.”

A company spokesman said in an email Metropolitan Property and Casualty “has observed some changes to its loss experience, and is going to make a new filing with data as of the end of the first quarter of 2011.” The filing will be made by June 1.

Consumer Watchdog’s challenge to the proposed rate increase was made under California’s insurance reform law, which allows any individual or organization to challenge proposed rate requests. That law, known as Proposition 103, does not cover health insurance requests.

Consumer Watchdog is working in support of a newly introduced bill that would create a similar rate regulatory scheme for health insurance rate requests, Foreman said. A.B. 52 is scheduled to be considered by the California Assembly’sHealth Committee on April 26.

Insurance Commissioner Dave Jones, who has been a leading voice in support of A.B. 52, has been stepping up the pressure on insurers making rate requests in recent months, particularly on the health insurance side of the market. Earlier this year, Jones asked four health insurance carriers to delay any rate increases for two months while the Department of Insurance reviewed their requests.

In March, Anthem Blue Cross Life and Health Insurance Co. slashed its rate increase from 16.4% to 9.1% and delayed implementing increases to co-payments and deductibles by 10 months from the effective date the company had originally requested. That cut was expected to save Anthem Blue Cross individual and family plan health insurance policyholders at least $40 million (BestWire, March 22, 2011).

Also in March, Blue Shield of California Life & Health Insurance, another of those companies, withdrew its request to raise premiums on any members in its individual or family health insurance plans for the rest of this year after Jones called its request excessive (BestWire, March 17, 2011). Another company that Jones asked to hold off on rate increases, PacifiCare of California, agreed to defer its premium increases by 60 days beyond their anticipated effective dates (BestWire, Jan. 31, 2011).

Metropolitan Direct Property and Casualty Insurance Co. currently has a Best’s Financial Strength Rating of A (Excellent).

By signing up for a pay-as-you-drive policy offered by State Farm instead of an estimated miles policy, you could see your future premiums fall. The less you drive below a threshold of 19,000 miles a year, the more you save.

Premiums are tied in part to the actual number of miles driven, as opposed to estimated annual miles listed on a policy. Any savings from driving less are applied to the next six-month premium period.

State Farm is the first auto insurer to offer pay-as-you-drive policies in the Bay Area. Auto Club of Southern California, which also began offering the policies earlier this year, does not do business in the Bay Area. While other major insurers, including AAA Northern California and Allstate Insurance, are not planning to offer them at this time in California, the industry will be watching to see if the concept catches on with consumers.

In its pay-as-you-drive program, which State Farm calls Drive Safe & Save, motorists can self-report their mileage online or at an agent’s office before renewing a policy. Drivers with General Motors, Saab and Saturn vehicles equipped with OnStar technology and who have an active diagnostics account can have the mileage automatically sent to State Farm. Customers who meet the OnStar criteria also can choose to self-report their mileage.

Bell is going for the self-reporting option, since her older-model Saturn is not equipped with OnStar. She has already made some changes to her driving habits.

“It does make me think to try and combine trips and avoid them whenever possible. I was sorting through some old papers and was taking them to be shredded, so I combined that with several trips. I was trying to minimize the amount of miles,” said Bell, who paid $338 for a six-month auto insurance policy from State Farm.

The mileage verification method — self-reporting or automatic device — is left up to the driver, who also can receive a small discount for signing up for a pay-as-you-drive policy. If a motorist chooses to self-report odometer readings, insurers can use a third-party vendor such as Carfax — which collects data from automotive repair shops — to verify accuracy.

California motorists always have been able to ask for a discount on future premiums for driving less than their estimated mileage. They still can, regardless of whether their insurer has rolled out a pay-as-you drive offering.

The pay-as-you-drive movement can be traced to Proposition 103, the landmark auto insurance reform initiative passed by voters in 1988. It required insurers to base premiums primarily on a driver’s safety record, number of miles driven annually and years of driving experience.

New regulations approved by former Insurance Commissioner Steve Poizner allow for actual mileage to be a voluntary alternative to estimated mileage. The regulations also make it possible for insurers to automatically collect mileage verification from an automatic device inside a vehicle.

Any savings from actual miles driven will show up in future premiums.

As an example, under State Farm’s Drive Safe & Save program, a 36-year-old single male driver with a Concord ZIP code of 94520 whose verified mileage was 12,000 miles in 2011 would pay an estimated yearly premium in 2012 of $684 on a 2007 Honda Accord. That amounts to an 8 percent savings off the $744 premium that same driver would pay if he was not enrolled in the program. If that same Concord driver were to put on only 8,000 miles, the estimated 2012 premium would be $640, or a 14 percent savings.

Before it launched its Drive Safe & Save program, State Farm drivers had two types of estimated annual mileage policies: premiums tied to less than 7,500 miles (short annual) and more than 7,500 miles (long annual).

The new program essentially provides future premium savings for every block of 500 miles that a motorist ends up driving below the threshold of 19,000 miles a year.

“Now you’ve got 39 different mileage segments where you can fall under and potentially have savings in each of those segments if you are moving down in mileage,” State Farm spokesman Bob Devereux said.

State Farm expects that 25 percent of its more than 3.4 million auto insurance policyholders in California will sign up for the program.

The program is not for everyone, given that the potential savings can only kick in if a motorist drives less than 19,000 miles a year.

“If you are driving more than 19,000 miles a year, there would be no opportunity for the savings that come with the Drive Safe & Save program,” Devereux said.

Pay-as-you-drive policies can benefit consumers, as long as they provide significant savings for driving less, said Doug Heller, executive director of Consumer Watchdog.

“What it does is tether your insurance premiums more closely to actual miles that you drive every year. By making some changes and alterations in your driving habits, you can actually save money,” he said. “If you’re driving less, you’re less of a risk to your insurance company so you should be able to pay them less.”

State Farm’s program does accomplish that goal, whereas the Auto Club of Southern California’s program does not provide significant savings, he said.

“State Farm’s program actually fits with the goals of this pay-as-you-drive idea,” Heller said.

POTENTIAL DRIVE SAFE & SAVE SAVINGS
Scenario: 36-year-old single male, Concord ZIP code of 94520, good driving record, drives a 2007 Honda Accord, 12,000 estimated annual miles. He would pay $744 a year for a full-coverage policy in 2011 offered by State Farm. Estimated potential savings that would appear for the 2012 premium if the same driver was enrolled in the Drive Safe & Save program: If he drove 8,000 miles, he would pay $640. if he drove 12,000 miles, he would pay $684 per year.

Liberty Mutual was found to be the most effective auto insurance advertiser in both the last year and the last quarter. The insurer’s “anti-texting while driving” ad featuring Oprah Winfrey was the most effective auto insurance ad in the last year. The anti-texting theme was also employed by Allstate’s “Joi Carter: X the Text” ad, which was the second-most effective auto insurance ad in the last year.

The Ace Metrix “Auto Insurance Advertising Effectiveness Report” reviews the effectiveness of the 136 different auto insurance ads that have run in the last year from companies that include Allstate, Esurance, Geico, Liberty Mutual, Nationwide, Progressive, State Farm and 21st Century.

“Once again this demonstrates that in order for an ad to reach maximum effectiveness it must deliver a relevant message to a wide audience. Both of the anti-texting ads scored high attention scores with an educational message that resonated across a wide cross-section of Americans,” said Peter Daboll, chief executive of Ace Metrix. “And, we know from our previous study around celebrity ads that Oprah is viewed as a particularly credible spokesperson for this issue.”

Auto Insurance Brands Continue Ad Battle

According to J.D. Power and Associates, advertising spending for insurance in 2009 ballooned to $4.15 billion with a large portion of that coming from Auto Insurance. This rate of growth outpaced all other ad categories combined and shows no signs of slowing as the auto brands continue to battle for consumer attention.

Ace Metrix data shows that Liberty Mutual is winning the brand battle with a strategy centered around running fewer separate creative executions, while Allstate, Progressive, State Farm, and Geico are using a wide variety of campaigns and creatives.

Most Effective Auto Insurance Advertising by Brand

Liberty Mutual
Progressive
21st Century
Allstate
Nationwide
State Farm Auto
Geico
Esurance

The Snapshot is a small dashboard device that plugs into an auto’s diagnostic system and records data that is transmitted back to Progressive via wireless technology. Customers can view the same info on a website set up for this specific purpose.

The information will then be used to determine if a customer qualifies for significant discounts based on safety, including how, how much and when the car is driven. Cars driven less often, in safer ways and at safer times of days are most likely to get a discount. Although Progressive and other auto insurers gather some of this information at the present time, it is based on the affirmative statements of policy-holders or applicants, without the ability to prove otherwise.

The result is that discounts are never as deep as they can be when the data is confirmed to be true. In essence, some of what we all pay for insurance coverage is based on collective risk. One person might pay less based on the assertion that only 7,500 miles are driven each year vs. the national average of 12,000. That discount can be made sweeter after use of the Snapshot when that precise number of miles driven are reviewed along with the other key data points collected.

Progressive has announced that some drivers will be able to reap the benefits of discounts up to 30% in as little as 30 days after information is gathered that demonstrates that they don’t drive aggressively and put few miles on their vehicle. The average time of usage is expected to be six months, after which the device gets returned to the company. If the six-month’s worth of information demonstrates that a driver is consistent in his or her good habits, low mileage and safety, discounts will become permanent.

Thirty two states allow for the device to be used and the company’s media release about the campaign claims that the 100,000 Snapshot devices are currently in use. The company has 11 million customers nation wide.

According to Advertising Age, Progressive’s competitors in the auto insurance market have nothing that even comes close to the sophistication of Snapshot. State Farm works with On-Star to collect mileage data on a small basis for a possible 10% discount and Allstate’s device is only available in the state of Illinois.

Critics will say that it is another piece of evidence that creeping Big Brother behavior is alive even in commercial companies’ relationships with its consumer base. Yet, to reduce premiums, many folks without anything to be afraid of will be able to demonstrate why they deserve to be paying less than they are at the present time.

As with all electronic and computer data that is stored by companies, when law enforcement and legal agencies come calling for information about individuals, it will have to be shared but only if accompanied by a subpoena. Since no location data is stored, Progressive will not be able to confirm where a policy holder lives or travels, but it will know how fast and how far you drive. In exchange for deeper discounts, the wary might be convinced it’s a great idea.

State Farm said it posted an underwriting loss in its auto insurance business of $2.8 billion in 2010, but improvement in the property and casualty segment drove after-tax net income of $1.8 billion for the year compared to $600 million in 2009.

Auto insurance is about 62 percent of net written premium from State Farm’s p&c companies. Earned premium in auto increased 1.6 percent from 2009 to $31.4 billion in 2010, State Farm said.

Spokesman Dick Luedke said the overall rate for auto insurance increased 2.8 percent in 2010. State Farm increased auto insurance rates in 32 states and decreased them in 10, he added.

The insurer in 2010 recorded a combined $3.1 billion underwriting loss in its p&c operations, which includes auto, homeowners, health and other lines. The mutual company took a $3.7 billion underwriting loss in 2009. Due to gains in investments and other income, net income for the segment was $1.3 billion, after tax, compared to $400 million in 2009.

In the homeowners line, earned premium was $17.3 billion, an increase of 5.9 percent from 2009. Incurred claims and loss adjustment expenses were $13.2 billion. The underwriting loss was $900 million.

State Farm Florida continues to post negative results. The subsidiary’s net worth decreased to $327 million from $366 million in 2009. It was $822 million in 2007. Since the Florida-only company’s start in 1998, it has recorded underwriting losses of $2.2 billion, including $186 million in 2010, Mr. Luedke said.

State Farm Florida is seeking an average 27.7 percent homeowners rate hike in the Sunshine State.

State Farm said its combined net worth increased $3.1 billion in 2010 to $61.2 billion. The insurer increased its net worth $4.8 billion in 2009 after it decreased $10.4 billion in 2008.

By Erik Holm

Geico Corp., the car insurer owned by Warren Buffett’s Berkshire Hathaway Inc. (BRKA, BRKB), added 188,500 new customers in the first seven weeks of 2011, putting it on pace for its best quarter for new business in two years.

Customers are flocking to Geico as it spends ever-increasing sums on advertising. The company also appeared to be holding the line on prices while some rivals are raising rates in an effort to improve profit margins.

The two U.S. auto insurers larger than Geico, State Farm Mutual Automobile Insurance Co. and Allstate Corp. (ALL), were charging customers more for coverage at the end of 2010 than they were at the beginning. With price increases in 32 states and decreases in 10, State Farm’s overall auto insurance rate rose by 2.8% in 2010, a spokesman said. So far in 2011, the company has raised prices in eight states and cut prices in one state.

Geico, meanwhile, was charging its average customer about the same at the end of last year as it did at the start, according to Berkshire’s annual report on Saturday.

That pricing trend helped Geico attract 165,000 new policyholders in last year’s fourth quarter, and put the company on pace to add about 350,000 drivers by the end of March. That increase would be significantly more than in any three-month period since the first quarter of 2009, when consumers were drastically curtailing their spending amid the depths of the financial crisis.

Halfway through the record-setting first quarter of 2009, Buffett crowed then that he and Geico Chief Executive Tony Nicely felt like “two hungry mosquitoes in a nudist camp. Juicy targets are everywhere.”

In his latest letter to shareholders, Buffett said Geico had “enthusiastically” spent $900 million on advertising in 2010 after spending $800 million in 2009. While an exact comparison to the marketing budgets of other insurers is difficult, the figure is likely significantly higher than the next biggest spender.

Geico’s underwriting profit jumped 72% to $1.12 billion in 2010, while Allstate’s fell 30% to $766 million. State Farm, which is owned by its policyholders, is expected to report 2010 results Tuesday.

Mercury Insurance said that it will cut its auto insurance rates by up to 10 percent for California policyholders after state officials approved the reduction request.

The Los Angeles company said Thursday that its California customers should save an average of about $36 per vehicle, a total $72 million overall in the state. Mercury insures nearly 2 million vehicles in California.

The rates will go into effect for policies that start or are renewed after Dec. 15. The company also announced a special discount for college graduates who are members of alumni associations.

“Mercury’s already low rates are now even lower, and we’ve added some great benefits to bring even more value to our California customers,” Chief Product Officer Robert Houlihan said in a statement. “These savings will help families stretch their hard earned dollars as the nation’s economy moves toward recovery.”

The Santa Monica advocacy group Consumer Watchdog said Mercury was responding to consumer outrage over earlier plans to hike rates, which were rejected by regulators. “Mercury is lowering rates today only because regulators blocked the insurance company from gouging customers as it originally planned,” Executive Director Doug Heller said.

Number of Accidents 23% Greater Than Daily Average

More Californians crash their cars on December 15 than any other day of the year, according to an Allstate Insurance Company review of its California auto insurance claims over the past four years. The number of accident claims on December 15 jumps 23 percent compared to the daily average during the rest of the year.

“This spike in crashes could be related to weather, holiday shopping, travel or other distractions,” says Robert Feldman, Allstate agency owner in metro Los Angeles. “What’s important for drivers is that we stay focused while at the wheel whether on the highway or in the driveway—on December 15 and every day of the year.”

Crunching the numbers on its California car accident claims, Allstate found that the daily average number involving its policyholders during the past four years is 435. On December 15 that number jumps to 539. The fourth worst day of the year is just three days later. On December 18 the average number of claims is 523.

According to Allstate, the top five days for collision claims in California are:

Top 5 Days for California Car Accident Claims

December 15
February 14
October 13
December 18
September 5

Three Tips to Keep Clear of Crashes

Allstate is asking California drivers to use December 15 as an opportunity to consider three simple safe driving tips.

Eliminate Distractions

Cell phones, channel-changing and shifting packages are all common distractions that can take our minds off our driving. Turn off the phone, place packages in the trunk and make your listening choice before putting the car in gear.

Drive According to Conditions

Rain, snow, high winds, even bright sunshine can all affect driving. Allow space between you and the nearest vehicle, slow down in congested areas and understand that another driver may be distracted—so drive defensively.

Don’t Drink and Drive

Holiday cheer has no place behind the wheel. The National Highway Traffic Safety Administration reminds drivers to keep the party off the road. Plan ahead and designate a sober driver, call a cab or use public transportation if you’ve been drinking alcohol.

To collect the data, Allstate looked at its California auto insurance accident claims from 2006 through 2009 to determine daily claim counts and the average number of claims for each day. The company, the country’s second largest auto insurance provider, used the data to reveal days when automobile insurance accident claims are most prevalent.