As Auto Insurance Rates Rise, Legislative and Non-Commercial Action and Other News Emerge

By Peter Kavinsky, CARE FREE TV

September 2, 2022

Legislative and non-profit action on high auto insurance rates was recently announced in California and Illinois, as news of GEICO and State Farm’s June rate hikes are just a couple of many that don’t seem to be going away anytime soon.

Consumer Watchdog, a non-profit public interest organization, said in a July 28 press release that “Insurance Commissioner Ricardo Lara should reject the Automobile Club’s Interinsurance Exchange (‘Auto Club’) proposal for a $202 million increase in auto insurance rates and his employment and education. based on a discriminatory rating system whereby working-class Californians pay 9% higher premiums.”

The excerpt was also included in a petition filed by Consumer Watchdog with the California Department of Insurance (CDI).

The Auto Club’s proposed total rate increase of 6.9% to over 1 million policies would mean an average annual increase in insurance premiums of $75 per insured vehicle and $140 per policy, with the worst increases coming to low-income drivers who don’t have none of the premiums. professional classes for which the Auto Club provides a premium discount, according to Consumer Watchdog.

“This economy is complex in itself – Californians shouldn’t be adding insurance company price gouging to their growing list of financial problems,” said Benjamin Powell, state attorney for Consumer Watchdog, in a press release. “These rebates for high-paying professional jobs allow low-income drivers to make up for the slack just because of their jobs.”

Powell added that Lara’s 2019 investigation found that the Auto Club was creating “large socio-economic differences.” The investigation was launched after Consumer Watchdog and 10 civil society and advocacy organizations filed allegations with CDI of illegal and discriminatory fare-setting practices by carriers. In December 2019, CDI proposed rules to combat this unfair discrimination, but according to Consumer Watchdog, almost three years later, these rules have not been implemented.

Occupation has never been legislated as a legitimate rating factor under Proposition 103 passed by voters, according to Consumer Watchdog. Proposition 103, passed by California voters in November 1988, requires prior state DOI approval before carriers can introduce CDI property and casualty insurance rates. The proposal would ban wagers that are “excessive, inadequate, unfairly discriminatory” or violate the wagering chapter.

When CDI was asked by Repairer Driven News to comment on the Consumer Watchdog news release and petition, they did not provide a direct comment, but said that Proposition 103 “has saved drivers billions of dollars.”

“Proposition 103 expressly allowed insurance companies to offer group discounts,” spokesman Gabriel Sanchez wrote. “These include members of labor unions, fraternal associations, veterans’ groups, seniors’ organizations, and service organizations who receive group discounts.”

The RDN also inquired when the CDI last approved any proposed increase in premium rates.

“The California Department of Insurance has not approved auto insurance rate hikes since the start of the pandemic in March 2020,” Sanchez said. “Instead, Commissioner Lara’s priority is to ensure premiums during the COVID pandemic accurately reflect consumer driving behavior and risk of loss. By ordering premium returns and keeping the line up for rate hikes, his actions have saved drivers $2.4 billion so far. The Insurance Department is also proposing new rules that will expand the number of discounts available to working families and protect legitimate group discounts.”

The proposed rules would allow “organized groups such as teachers, firefighters, veterans and the elderly to continue to enjoy these auto insurance discounts,” Sanchez added.

“But regulations prohibit auto insurance companies from simply providing discounts based on a person’s education or occupation, which prevents many Californians from accessing those discounts.”

The Consumer Watchdog petition also alleges that the Auto Club overcharged policyholders during the COVID-19 lockdown – when accident claims were reduced – and could owe hundreds of millions of dollars in additional reimbursements as a result.

In terms of pandemic numbers, Senator Jacqueline Collins (D-Chicago) plans to introduce legislation during the fall session “to give the Illinois Insurance Department more power over how much insurers can charge,” reports the Chicago Sun-Times. .

The Sun-Times reports that Collins’ goal is for the department to have the power to claim refunds when premiums are too high and to prohibit “discriminatory” non-driving features from being used in pricing.

“People are already suffering,” Collins told the Sun-Times. “We are a state that requires consumers to purchase insurance.”

She added that she sees insurance rules in California as a model that Illinois can follow, which requires DOI approval of all proposed rate hikes before they go into effect.

During the Collision Industry Conference (CIC) on July 21, CSAA Insurance Group APD business consultant Dan Tessadri described how carriers process premium claims and said the premium increase could take two years to materialize. However, this depends on the state. In Illinois, for example, “auto insurers can set whatever rates they want and report them to the state after they’ve already started charging customers more,” reports the Sun-Times.

According to a recent analysis by the Illinois PIRG Educational Foundation and the Consumer Federation, the top four carriers in Illinois by market share—State Farm, GEICO, Progressive, and Allstate—are charging customers $280 million more than is necessary to maintain their profitability in 2019. during a pandemic. America (CFA). And that’s taking into account the $220 million that the four insurers collectively provided in reimbursement to customers in 2020, the organization said.

In March, the Illinois Department of the Interior directed auto insurers to disclose details of the profits they made during the 12 months of lockdown from the COVID-19 pandemic and said the information would be available to the public by June 30. The request followed the letter. sent by 16 state senators and nine advocacy organizations in January urging the department to investigate windfall profits made by carriers. The auto insurers challenged the DOI’s legal authority to require profit disclosures.

According to Crain’s Chicago Business, State Farm decided to raise its auto insurance premiums in Illinois by 3% in May, just two weeks after the 5% hike went into effect. The publication said papers filed with the Illinois DOI show that the average premium should have increased by $60 per year with two rate hikes.

An analysis by S&P Global Market Intelligence released at the end of July found that State Farm “continued its trend of private car rate hikes, securing 17 rate hikes in June, which could increase the group’s total premiums by $377.8 million” and that GEICO “may see the biggest cumulative increase in private auto premiums as a result of the rate hike approved in June.”

“GEICO’s subsidiaries received regulatory approval for 27 rate hikes in seven states within a month, which could increase the group’s total premiums by $418.7 million,” S&P concluded. “More than half of this increase is expected to come from Virginia, where regulators have approved six increases, with two of them among the most important changes. Both new rates went into effect June 16 for new business and have an expected effective date of August 14 for business reopening.”

By contrast, Progressive’s subsidiaries implemented nine rate cuts in Arkansas, Wisconsin, Iowa, and Montana, which S&P said “could reduce total group premiums by $13.3 million.”

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