Wash. Regulators Fine GEICO for Overcharging Policyholders

Washington state regulators have fined GEICO $100,000—and compelled the auto insurer to refund millions of dollars—after a computer glitch reportedly caused the company to use unapproved rate formulas that overcharged tens of thousands of policyholders.

The Washington State Office of the Insurance Commissioner announced that, in a settlement reached earlier this month, GEICO agreed to pay refunds totaling $7.5 million—including 8 percent annual interest—to more than 25,000 of its Evergreen State customers by the end of this year.

The direct-to-consumer coverage provider—which has become the nation’s third-largest auto insurer through offering free online auto insurance quotes and other services—informed state regulators in May of a computer error that had caused 7 percent of its Washington policyholders to overpay for their coverage between late August 2009 and June 2011, regulators said.

“A computer database error caused the problem, which the company reported to us promptly,” Commissioner Mike Kreidler said in a news release. “GEICO has also agreed to a two-year compliance plan that includes multiple audits.”

Kreidler’s office said the refunds will work out to about $300 each, and many of them have already been paid. The company has reportedly contacted current and former customers and is expected to settle with them all before 2012.

Regulators fined GEICO $150,000 over the incident, but one-third of that fine will be suspended for two years, providing the company sticks to the terms of its compliance plan.

The fines will be deposited into Washington’s general fund, according to Kreidler’s office.

About Ben Zitney
Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.

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