Liberty Mutual Agrees to Repay $7.7 Million to Minnesota Policyholders

Liberty Mutual, the fifth-largest property and casualty insurer in the U.S., has agreed to return $7.7 million in premiums it collected from Minnesota policyholders, the state’s Department of Commerce announced.

Following an investigation by the Minnesota Department of Commerce, the state’s commissioner of insurance, Grace Arnold, notified Liberty Mutual she was ready to take legal action on allegations the company violated multiple state laws.

According to a consent order, the state alleged that Liberty Mutual:

• Failed to offer a mandated minimum discount for anti-theft protection devices in vehicles it insured.

• Considered and used applicants’ tenancy status in making decisions about multi-policy discounts — meaning discounts for bundling home and auto insurance.

• Applied automatic rate increases for auto insurance policyholders without first obtaining state approval for the increases.

What Liberty Mutual must do

The insurer, which operates under multiple company names in Minnesota, including Safeco Insurance Company of Indiana, waived its right to a hearing, according to the consent order.

Under the agreement, Liberty Mutual will:

• Issue refunds or credits, or reduce the premiums, of the 86,506 affect policyholders within 360 days of the effective date of the consent order — Oct. 17, 2023.

• Report back to the Department of Insurance within 450 with a summary of the refunds, credits, and premium reductions it issues in response to the order.

How much will policyholders get back?

In a press release announcing the consent order, the Department of Commerce said Liberty Mutual has already begun returning funds to policyholders.

The company has:

• Refunded or credited more than $2.27 million to 53,604 drivers affected by the anti-theft-device discount. The average refunded/credited amount is $42.41 per policyholder.

• Begun repaying about $2.7 million to 7,700 current and former policyholders affected by the bundling discount. The average amount is $350.65 per policyholder.

• Pledged to provide $2.1 million in credits and $670,000 in refunds to approximately 11,800 current and 8,700 former policyholders affected by the unapproved auto insurance rate increase. The average amount for current policyholders is $177.96, and $77.01 for former policyholders.

“When consumers pay premiums for insurance policies, they are protected by state law to ensure they get what they pay for,” Arnold said in the press release.

What’s next?

The consent order also levels a $150,000 civil penalty against Liberty Mutual — but waives the fine as long as the insurer fully abides by the terms of the order. However, if the insurance company doesn’t fully comply, the commissioner can reinstate the fine.

Liberty Mutual is the fifth-largest property/casualty insurer in the country, according to the National Association of Insurance Commissioners (NAIC). It’s the third-largest provider of home insurance, and the sixth-largest for passenger vehicle insurance, the NAIC reports.

In total, Liberty Mutual wrote more than $45 billion in premiums across all product lines in 2022, according to NAIC data.