By Kevin Smith, THE DAILY NEWS OF LOS ANGELES
April 23, 2020
A Los Angeles-based watchdog group is urging California Insurance Commissioner Ricardo Lara to suspend all auto insurance rate hikes through Sept. 1 or for the duration of shelter-in-place restrictions, whichever comes later.
Consumer Watchdog notes that Californians are doing virtually no driving amid the COVID-19 pandemic, other than occasional trips to the supermarket.
A UC Davis report shows accidents have been reduced by at least half as of April 11, the organization said, yet the state Department of Insurance website shows that at least 21 California auto insurance companies are still requesting rate increases.
In a statement issued Thursday afternoon, Lara’s office said it is requiring insurance companies to report how they are adjusting premiums in order to ensure rates are “adequate and reflective of the times” drivers are in now.
“Under California law approved by voters, the department will not approve rate filings that are excessive, inadequate or unfairly discriminatory,” the statement said.
Consumer Watchdog said Los Angeles-based Farmers Insurance is seeking a rate hike that would require essential workers — including police officers, firefighters, nurses and grocery and warehouse employees — to pay more for auto insurance than most other drivers.
Farmers disputes that allegation.
In a statement released Thursday, the company said its current rate application retains an existing “affinity group structure” that provides first responder firefighters, police officers and nurses with rates that are about 6% lower than Farmers’ standard rates.
Consumer Watchdog, the company said, has asked the commissioner to eliminate its affinity discounts.
“If they prevail, the premiums charged to first responders and to hundreds of thousands of other Farmers policyholders will unfairly increase,” the company said. “We, therefore, oppose that request.”
Mercury Insurance Co., also based in L.A., was asking for increases that would hit blue-collar workers hardest, the group claims. The insurer has since agreed not to pursue a rate hike.
Mercury’s about-face was prompted by a letter Consumer Watchdog attorney Pamela Pressley sent to the insurance commissioner asking that Mercury’s proposed hike not be approved.
In a subsequent letter to Lara, Mercury attorney Joseph Miller said the company’s application for a rate increase was filed before Gov. Gavin Newsom’s stay-at-home order was in place and before the massive economic impact of COVID-19 became apparent.
“It is too early for us to predict the rating impact of this disaster once the stay-at-home orders have been lifted, but our pre-pandemic results indicated a need for a rate increase, and we believe it is likely that such a need will exist once life in California returns to normal,” Miller wrote.
March, April relief
Lara announced last week that insurance companies must provide a premium credit, reduction, return of premium or other appropriate adjustments as soon as possible — and no later than August — for auto premiums paid for the months of March and April.
Consumer Watchdog says that’s not enough.
“You cannot simultaneously order premium refunds to consumers — a move that is justified because people are driving fewer miles and existing rates are likely excessive — and also approve rate increases,” the organization’s letter said.
The U.C. Davis study shows the stay-at-home order has resulted in about 15,000 fewer collisions and 6,000 fewer injuries or fatal accidents per month.
In a letter sent Thursday to Lara, Consumer Watchdog said the “devastating economic consequences” of the pandemic demand immediate action.
“Current insurance rates are based on pre-pandemic projections of accidents, losses and claims that obviously do not reflect the unprecedented shutdown of virtually all economic activity in the state,” the letter said.
At the very least, carriers need to be sensitive to the appearance of boosting rates while many customers are temporarily out of work and most are barely driving anywhere, said Carmen Balber, Consumer Watchdog’s executive director.
“It’s completely outrageous,” she said.
“We can’t know what insurance companies’ losses will be during the coronavirus pandemic, but we know they have dropped significantly.”
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