Consumer Group Objects as Mercury General Proposes 5% Auto Rate Hike in California

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By Timothy Darragh, BESTWIRE

January 29, 2020

Mercury Insurance Co. subsidiary California Auto Insurance Co. is seeking a 5% rate hike for drivers in the state, which has a consumer group up in arms.

California Department of Insurance records show CAIC issued its request for an increase Dec. 6.

Consumer Watchdog called on California Insurance Commissioner Ricardo Lara to reject the request, saying it includes charges that raise rates on poorer drivers.

Consumer Watchdog noticed that Mercury was proposing not just a 5% increase to its premiums but an increase in the surcharge to drivers not employed in a preferred occupation that requires a college degree or professional license,” it said in its letter to Lara.

It said CAIC’s proposed base rates would have drivers in the “Basic Program” paying 16% more than engineers.

“Moreover, whereas educators under the current base rates were surcharged less than half a percentage point more than engineers,” Consumer Watchdog wrote, “educators will now pay 7.77% more than engineers.”

“Commissioner Lara should stop approving rate increases that he has acknowledged are discriminatory and issue rules to ensure that lower income communities of color no longer pay more to subsidize the rich,” said Carmen Balber, executive director of Consumer Watchdog. “California law prohibits drivers from paying more based on how much they earn and where they went to school, instead of how well they drive.”

Lara is investigating the fairness of allowing insurers to use affinity groups and other non-driving measures as reasons for discounts on auto policies. He has called the practice “disturbing,” but insurance representatives said the answer is not to ban their use but to expand affinity groups (Best’s News Service, Sept. 25, 2019).

A Mercury representative said the company does not comment on pending rate filings.

In its third-quarter earnings report, Mercury said it year-to-date unfavorable development in 2019 was “primarily attributable to higher than estimated defense and cost containment expenses in the California automobile line of insurance business.”

Automobile claims severity is rising as plaintiff attorneys drive up the cost of claims or settlements and juries decide higher awards, Mercury General Corp. Chief Executive Officer Gabriel “Gabe” Tirador said in a conference call (Best’s News Service, Oct. 28, 2019).

If approved, the 5% hike would come on top of a 6.9% rate increase that took effect in March for California Auto.

The top five writers of premiums for all private passenger auto policies in California in 2018 were: State Farm Group, with 13.74% market share; Farmers Insurance Group, with 10.68%; Berkshire Hathaway Insurance Group, with 9.7%; Allstate Insurance Group, with 8.99%; and Auto Club Enterprises Insurance Group, with 8.69%, according to BestLink.

(By Timothy Darragh, associate editor, BestWeek: [email protected])

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