Group Says State Farm Withheld Dividends
A consumer group charged Monday that State Farm Mutual Automobile Insurance Co., the nation’s largest provider of car insurance, owes its policyholders almost $7 billion in dividends.
Citizen Action said the giant insurance company has gouged its more than 50 million policyholders by distributing very little of the so-called surplus funds that are left after claims and other company expenses have been paid.
“State Farm has systematically deprived policyholders of dividends . . . by accumulating and retaining a policyholder surplus well in excess of industry standards,” said Robert Brandon, vice president of Citizen Action, a consumer lobbying group.
The consumer group noted that a class-action lawsuit had been filed May 28 in California demanding that State Farm return $6.87 billion of surplus funds to its holders.
A spokesman for State Farm, headquartered in Bloomington, Ill., said the California lawsuit would be defended vigorously.
“We make no apologies for being stronger financially than the industry average,” the spokesman said. The company brought in almost $12 billion in premiums last year, 15% of the American car insurance market.
California Tops List
Citizen Action said the money in dispute includes about $634 million owed to policyholders in California, $500,000 in Rhode Island, $171 million in Ohio and $284 million in Florida.
The California lawsuit was filed on behalf of Benjamin Barnes, a State Farm policyholder for 32 years, and all other policyholders nationwide.