State Investigates Discrimination Complaint Against Insurance Firm

State Insurance Commissioner Roxani Gillespie said Friday that she has initiated an investigation into allegations that the Farmers group of insurance companies, the second-largest seller of auto insurance in California, has been refusing to sell to several ethnic and racial groups.

Gillespie said that on March 1 the Insurance Department received complaints from what she identified only as “an individual source” and that department inquiries have not gone far enough yet “to tell if it’s justified.”

Farmers, quickly issuing an emphatic denial that it discriminates against any ethnic or racial group, charged through a spokesman that the allegations are coming from a disgruntled former agent who had been terminated by the company. The agent was not identified.

‘We Do Not Condone It’

Ed Mathews, vice president for corporate relations, said Farmers has already invited the Insurance Department to send an investigator next week to “look at all of our records.”

“It would be a disaster for us to tell our agents to discriminate by ethnic groups,” Mathews said. “We did not tell anybody to do it, and we do not condone it. It’s the very opposite of all the things we stand for in relation to the public.”

Mathews said that it is Farmers’ understanding that the former agent claimed, among other things, that he had been told not to sell to Armenians. Pointing out that Gov. George Deukmejian is of Armenian heritage and that he is the insurance commissioner’s immediate superior, Mathews suggested that this might be one reason Gillespie is so interested in the matter.

“It would be very stupid of us to discriminate against Armenians when the governor of the state is one,” Mathews said.

‘Complex’ Matter

Gillespie did not name any of the ethnic or racial groups that had been mentioned in the complaint. She merely remarked that the matter is “complex and it will take a while” for investigators to determine the facts.

There have been repeated suggestions by critics of the insurance industry that many companies are refusing to sell in certain areas and to certain groups, particularly in minority and inner-city areas. But this is the first time the Insurance Department has ever announced that it has singled out a particular company for an inquiry into specific allegations of such discrimination.

In another matter related to the department, an insurance company that was named earlier this week in a department survey as the one that had the largest ratio of complaints directed against it on homeowners’ policies of any of the state’s 25 biggest insurers filed new information Friday that it said showed it was not doing as badly as the survey indicated.

Survey Disputed

Republic Financial Services said that it actually ranks 24th among the 25 companies, not last, and that only 0.4987 complaints per 1,000 policies had been made against it in 1986, not 1.049 per 1,000, as the department survey reported.

A spokesman for Republic, which does business in California under such names as Blue Ridge, Southern and Vanguard Insurance, said company officials mistakenly told the Insurance Department that they had 157,282 homeowners’ policies in force in California that year, when in fact they had 330,894. The corrected figure reduced its ratio, the spokesman said.

However, later in the day, department officials said they would stick with the figures listed in the survey.

“We had several communications with them in compiling our figures,” said Nick Byrne, a senior policy officer. “They understood at the time exactly what we were asking for.”