Insurer's Service Fees Ruled Illegal

By William Murphy

Published on September 06, 2006

Farmers gave auto insurance customers the option of paying for six months of coverage all at once, 50 percent at the time of purchase and 50 percent within 60 days, or month by month. The insurer charged service fees that amounted to $60 and $95, respectively, for the latter two payment options.

Judge Jay M. Bloom ruled that Farmers charged customers more than specified in the policies and more than approved by the California Insurance Department. Bloom’s ruling affects customers who purchased a policy on the month-to-month payment plan between October 6, 2000, and August 2005.

Farmers spokesman Jeff Beyer expressed astonishment at the decision, saying that Farmers has offered monthly billing as an option for 44 years. He said that because the fee has never been considered a part of the premium, it has always appeared on the customer’s bill rather than the policy declarations page. Farmers, one of California’s top three auto insurers, has vowed to appeal Bloom’s ruling.

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