Farmers Insurance "short rate" Refund Investigation

Did your insurance company fail to inform you that it would charge you a penalty if you cancelled your policy? Did your insurance company inform you that it would charge a “short rate” if you cancelled your policy? Did your insurance company explain what a “short rate” is? OR: Did your insurance not tell you that it would penalize you if you cancelled your policy? Did your insurance company fail to tell you how it would compute the amount of the premium it would return to you if your cancelled your policy? (We expect it is the latter, not the former. E.g. You didn’t know your insurance company would charge you a penalty if you cancelled your policy, and you were not informed of the amount of the penalty.

Some insurance companies don’t refund all of the unused portion of its policyholder’s premium. Insurer’s call refunding less than the unused portion of your premium “paying a ‘short rate.’”

Many insurers refund all the unused portion of a premium, when an insured cancels their policy. However, a few insurer’s keep part of their insured’s unused premium. They effectively charge a penalty fee if your cancel your policy.

Farmers insurance is one of the company’s that does not return all of the unused premium to its insureds when they cancel their Farmer’s policies.

In Farmers’ policies, Farmers states that if it cancels the policy it will refund all of the unused premium. (It calls this returning the premium “pro-rata.”)

However, Farmers does not return all of the unused premium to its policyholders when the policy holder cancels the policy. When the policyholder cancels their Farmers policy they are paid something less than the unused premium and something less than the “pro-rata” share of the premium they paid. Farmers calls its payment of less than the unused portion of the premium the “short rate.” What this really means is that if a Farmers’ insured terminates their policy at any time other than renewal of their policy, Farmers will charge the insured a penalty fee. The penalty fee is the amount of money that is the difference between the “short rate” and the “pro-rated unused portion of the premium.”

Farmers’ policies do not define “short rate.” Therefore a policy holder cannot know what the “short rate” is. Farmers’ insureds are not informed that they will be charged a penalty if they cancel their policies before the policy’s renewal. How can an insured agree to something not explained before they buy a policy or defined within the policy?

A Farmers policyholder has contacted Eppsteiner & Fiorica to complain that he was charged a penalty for cancelling his policy. He further complained that he was never informed that he would be penalized if he cancelled his policy: not by Farmers’ and not by his Farmers’ agent. When this Farmers policyholder asked his Farmers agent what the “short rate” was they told him they couldn’t explain it. When this same insured asked a Farmers Insurance Group employee how Farmers computes the “short rate,” the employee said they could not explain it. When this insured queried Farmers’ in writing about how to compute the short rate, Farmers wrote to him and said it could not explain the “short rate” computation because it was too complex.

The foregoing demonstrates that Farmers’ insureds cannot know they are agreeing to be paid the “short rate” when they buy their policies. How can you agree to something not understood or known by Farmers insurance agents and employees? How can a Farmers insured agree to something that is not explained before they purchase their policy; not defined in sales material and not even defined Farmers’ policies? The answer to these questions is that Farmers’ insureds did not agree to anything they don’t know, is not explained to them and is not defined within their Farmers’ policies.

Eppsteiner & Fiorica is investigating Farmers practice of paying its insureds the short rate of their unused premiums. If Farmers or another insurer has charged you a penalty, e.g. paid you a “short rate” refund contact Eppsteiner & Fiorica. Farmers’ insureds may not even realize that Farmers charged a penalty when it refunded your unused premium.

Contact Eppsteiner & Fiorica if you cancelled a Farmers’ policy today toll-free and without obligation at 866-548-8857 or via our online contact form. You may have the right to recover the penalty Farmers charged you for cancelling your policy.