Even former Farmers Insurance Agents think the insurance giant is lacking when it comes to customer satisfaction.
by Jason Van Steenwyk, Viewpoints Money Expert
The Farmers Insurance Group is a large multi-line insurance carrier operating out of Los Angeles, California. It sells auto and motorcycle insurance, homeowner’s coverage, renters insurance, life insurance and umbrella liability coverage. The company also sells some specialty policies such as ATV, mobile home, boats and travel trailer insurance policies, as well.
A separate arm, Farmers Financial, also sells mutual funds, variable annuities, variable universal life insurance and Section 529 college savings plans. Often, however, you’ll find the same agent selling both insurance and investment products. It depends on whether that particular agent pursued a Series 6 license with the SEC. Many insurance agents choose not to, however, preferring to focus on insurance solutions and no-risk products like fixed annuities.
History of Farmers Insurance
Farmers Insurance Group has been around since 1928, and currently service about 10 million families. Two men, John Tyler and Thomas Leavey, noticed that rural people—farmers—had better driving records and got into fewer accidents than city drivers. Auto insurance as we know it now was still in its infancy, but there was still demand for protection against liability and injury or death resulting from auto accidents.
Tyler and Leavey got a loan and opened up their own insurance company, the Farmers Automobile Inter-Insurance Exchange, in Los Angeles in 1928, offering lower premiums to farmers. Today it sells its insurance policies through a network of hometown insurance agents across the country.
Currently, Farmers carries an A rating (Excellent) from A.M. Best for financial strength and security. Moody’s rates it as A2 (Good) and Standard & Poor’s rates the carrier AA-, or “very strong.”
Farmers has had its issues in the past. The company has historically scored poorly in JD Powers’ annual Collision Repair Satisfaction Survey, compared to other carriers. Their claims satisfaction numbers aren’t exactly awe inspiring this year, either: They ranked 16th out of 24 auto insurance carriers for customer satisfaction according to this 2012 Forbes ranking. The top performers were USAA, The Hartford, Liberty Mutual, American Family, AAA Auto Club Group and Nationwide. However, because USAA limits its membership to military members, veterans and their families, they were not included in the JD Powers rankings.
So how does Farmers fare among you, the Viewpoints community?
Again, not great. You gave Farmers Insurance an overall score of 52 out of 100 based on 159 reviews as of this writing—well below the insurance company average of 68.
The news isn’t all bad for Farmers, though. One Viewpoints reviewer, gshekailo (Reviewer since 2009), appreciates the fact that premiums haven’t gone up on him for four years—despite a major house fire resulting in a large claim.
Nanjones (Reviewer since 2007), on the other hand, complains that Farmers was prone to raising her rate every six months.
I used to have Farmers for over six years. Every 6 months they would raise their rates ($10 to over $20 per month) and charge you a monthly service charge. I changed insurance companies who have tripled the coverage and saves me over $23 per month.
Reviewer JoJoC (Reviewer since 2008) is actually a former Farmers agent, and so offers an insider’s perspective, which I quote at length here:
As a customer, things always went smoothly, I never had a problem, except with the constant rate increases and the various “Miscellaneous Charges” that never could be explained or removed! My agent was great and was the reason I thought it would be a good idea to become one.
As an agent, I realized that the Farmers system is greatly flawed and their computers don’t always synch up with the information that is input. For example, when a customer gets a renters, auto and life policy, they get a multi-policy discount. However, when the system runs it validation, if there is more than one driver in the house, but only one life policy, it will drop that discount with no warning to either the agent or the customer, until the customer gets their bill and sees a huge increase. And fixing it, well that is a complete JOKE!
Even the best agent in the district where I worked had MAJOR problems with the different systems which was highly frustrating. Also the billing, they allow you to pay monthly, even give you the option to get a discount for setting up ‘Auto-Pay’ but then they will charge you not only a monthly fee based on the amount billed, but also an initial ‘Policy Fee’, so you are actually paying MORE to pay it monthly, even with the supposed DISCOUNT they give. Also, they don’t give a discount for those who pay it in full up front like some companies do.
It is also very apparent that the company has no interest in ‘GOING GREEN’ or even being eco-friendly. Any change, either by an agent or by the system just running, they send you all sorts of mail. A minor change, like you added a secondary phone number, they will send you the ENTIRE policy again, which can be a good 30 pages. Any billing adjustment, they send you a new bill. I had a customer that needed to make an adjustment to her policy, and it generated 14 pieces of mail in 5 business days. I actually had customers calling and asking me to STOP SENDING THEM THINGS IN THE MAIL. It was ridiculous. And there is no way to “turn off” the mail, or the constant notifications. What was frustrating more than anything though was when the customer would get 3 bills for the same billing period but with 3 totally different amounts due on each. Then when they would call me looking for an explanation, I would call the billing department and they couldn’t give me an answer either.
Also there was never a way to tell a customer “This is what you will see on your bill” or “This is exactly how much you owe and you will be paid in full”, because there was never a certainty it would remain consistent. Bills constantly were wrong and the way Farmers has their billing set up, there is never a time when the customer is actually “paid in full” they are either ahead or slightly behind.
It was a very illuminating experience working for them after I had been a customer for so long. Their systems and the lack of flexibility in their products were so frustrating that I removed their products from my agency and switched my insurance to State Farm.
All I got from them was constant frustrations with no answers, and uncompetitively priced, limited products to offer customers; and HUGE problems with billing or discounts.
Even for a perfect driver, you will experience rate hikes for no apparent reason. They have excellent claims department, but at the same time, they will be very stingy as what will be covered and how much they will pay. Also unless you ask the specific questions, they won’t just give out answers or information.
So as a consumer when you are not a professional in that industry and don’t have the time to be a professional in the industry, you are counting on the transparency and information the agent or company gives you, hoping it is the WHOLE story and not just part of it, like bait. However, with Farmers you will find, it’s very hard to get the WHOLE story or even the consistent story every time.
If this view is accurate systemwide, this goes a long way towards explaining Farmers’ customer satisfaction woes.
Where Farmers Insurance succeeds
A couple of pluses: Farmers is one of the few multi-line carriers to offer term, whole life and universal life all under one roof. So if you’re a fan of permanent life insurance, but you like to try to keep everything accessible under one roof, and you have an agent who “gets it” (few do), then that’s one reason to consider Farmers. Life insurance has a pretty straightforward claims process: Either the insured is deceased or he is not. Gray areas are pretty rare, and claims problems are usually not an issue with life insurance. The problems come in when an adjuster has to get involved, or where the insurance company can create roadblocks to the prompt payment of legitimate claims in hopes that you’ll settle for less.
Also, a great agent is a great agent, regardless of the company. For all its problems, if you have a terrific Famers agent who listens to your needs and makes great recommendations and follows through on policy service, that’s a powerful reason to use them.
If that’s not a factor, I’d be looking elsewhere, though, until Farmers shows that it’s serious about addressing its claims issues.
Editor’s note: If you have professional experience with insurance, Viewpoints is recruiting experts in priority product categories to write for our blog. Check out this overview of the Viewpoints Category Expert Program, including qualifications, compensation and how to apply.
Jason Van Steenwyk has been writing about personal finance and investments since 1999. He first learned the trade as a staff reporter with Mutual Funds Magazine, part of the FORTUNE Group of magazines at Time, Inc. Since then, Jason has been published in many financial consumer and trade publications, including Wealth and Retirement Planner, Registered Representative, Annuity Selling Guide, Bankrate.com, Senior Market Advisor and many more.
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