Posted on 28 Dec 2011
Geico has been ordered to refund $7.5 million by the end of the year after overcharging its Washington state customers, according to the state insurance commissioner. The automobile insurer was also fined $100,000 in relation to the overcharges.
"A computer database error caused the problem, which the company reported to us promptly," Washington State Insurance Commissioner Mike Kreidler said in a statement. The computer error resulted in 7%, or 25,267, of the company's Washington customers being overcharged for insurance between Aug. 24, 2009 and June 2011.
The refunds, many of which have already been paid, will average roughly $300, according to the insurance department. The company has been contacting active and former customers affected by the issue and expects to have all refunds paid by the end of the year.
Geico has also agreed to a two-year compliance plan that includes multiple audits. An additional $50,000 fine was suspended, on the condition the company abides by the terms of the compliance plan.
The Berkshire Hathaway unit was the sixth-largest private passenger auto writer in Washington in 2010, with 7.19% of the market share, according to BestLink.
Geico is a leading provider of personal auto insurance written on behalf of government employees and military personnel, according to BestLink. In addition, the group is a national personal auto insurance carrier, with modest geographic concentration along the East Coast. Its business is marketed and distributed primarily by direct response methods in which customers apply for coverage directly to the company over the phone, through the mail or via the Internet.
Berkshire Hathaway Inc. reported a 23.8% drop in third-quarter net income, due to hefty derivative losses, and while the company said pricing in most property/casualty lines remains competitive, the results in Berkshire Hathaway's most recent quarter showed improvement in underwriting profit. Premiums earned at Geico rose 8.3% to $3.91 billion. Pretax underwriting profit at Geico dropped 60.6% to $114 million from $289 million.