AUSTIN (AP) - About 8,000 Texans will split more than $500,000 in refunds from Farmers Insurance under an agreement between the company and state regulators.

The Texas Department of Insurance last year accused Farmers of overcharging some customers from July 1996 to January 1997 based on how long the policyholders had previous insurance before applying for Farmers' coverage.

Farmers is the state's third-largest auto insurer with 1.5 million customers. It denied any wrongdoing but agreed to make refunds.

Under former Farmers rules, prospective policyholders had to have prior insurance for at least three years to be offered the company's best rate and two years to get Farmers' standard rate.

All other drivers were given the company's highest rates.

Under department rules, insurance companies cannot consider applicants' lack of prior insurance in determining rates unless the drivers were on the road without insurance for a full month in the previous year.

"I think it boils down to a difference of opinion regarding a TDI rule," Farmers' spokesman Mark Toohey said Wednesday after the department announced the refund. "Our folks interpreted the rule one way, TDI interpreted it another way.

"The bottom line is we decided it was in the best interest of our entire organization and all of our customers to end what could have been a long, drawn out legal procedure," Toohey said.

Toohey said the company has not determined how the refunds will be distributed.