Garamendi Calls Farmers Plan to Raise Quake Deductibles Illegal;

By: From Times Wire Services


California Insurance Commissioner John Garamendi on Thursday
accused Farmers Insurance Group Inc. of illegally planning to raise
deductibles on earthquake insurance by 25% without prior approval.

Garamendi ordered Farmers to explain itself before him on Sept. 6.
Afterward, he said, he will decide whether to issue a cease-and-desist
order. "In declaring its intention to only renew earthquake insurance
policies with 25% deductibles, the Farmers Cos. have basically declared
their intention to offer worthless earthquake insurance," he said.

Garamendi said the plan violates three state laws. The first
guarantees a policyholder's right to renew coverage at the same
deductible. The second guarantees the availability of earthquake
coverage. The third requires prior approval of rate changes.

Farmers, a wholly owned subsidiary of London-based B.A.T Industries,
announced July 15 that it would raise deductibles on California quake
coverage by between 10% and 25%, depending on the type of policy, while
reducing premiums 25% to 40%.

The company had previously suspended the sale of new residential quake
policies.

It said the moves were intended to protect Farmers' financial strength and its ability to grow.

The company estimated that since 1973, it had collected $449 million in earthquake premiums but paid losses of $1.24 billion. It also said it had identified nine fault lines within California that had loss potentials ranging from $1 billion to $3 billion.



Type of Material: Wire Service Story
Descriptors: CALIFORNIA STATE INSURANCE COMMISSIONER; FARMERS INSURANCE GROUP INC; INSURANCE RATES; EARTHQUAKE INSURANCE;

Copyright (c) 1994 Times Mirror Company