Farmers Insurance — California’s second-largest homeowners insurer — will lower its rates in the state by 18 percent, joining State Farm, Safeco, Hartford, USAA, Nationwide and Kemper in heeding Insurance Commissioner John Garamendi’s call for lower rates.

Garamendi, who will be sworn in as California’s lieutenant governor Jan. 7, said the rate reductions by all seven companies will save homeowners $439 million a year on their insurance policies.

Farmers’ rate cuts apply to the company’s Special Form, Protector Plus, Renters and Condominium Owners policies, and are likely to take effect in June, the Department of Insurance said in a statement.

Farmers will increase the dual auto-home discount from 12 percent to 15 percent and provide discounts for newer and newly renovated homes. Farmers is also introducing a claim forgiveness policy for customers who remain claims-free for six or more years before filing a claim.

After a study concluded that four of the state’s insurers were paying less than 50 percent of each premium dollar on claims, Garamendi in June ordered Allstate, State Farm, Farmers and Safeco Insurance to justify their homeowner rates. The study, “Lower Claims, Higher Profits: Where Do Your Premium Dollars Go?” found auto and homeowners insurers experienced historically low loss ratios in 2004 and 2005.

The study found that in 2005, Allstate paid out 41 percent of collected premiums; Farmers paid 37.7 percent; and Safeco paid 26.3 percent. Some insurers have claimed that they need to keep a large percentage of premiums to build financial reserves and surplus, but Garamendi has argued the companies have strong financial reserves.

According to the study, State Farm paid out 104.9 percent of its collected premiums to settle claims in 2003, but still posted a profit from investment and other income. The next year State Farm kept 68 percent of collected premiums, and in 2005 kept 62.4 percent.

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