Santa Monica, CA –Metropolitan Direct Insurance Company has withdrawn a $6 million rate hike after Consumer Watchdog challenged the company’s proposed 5.8% increase to its auto insurance rates. Consumer Watchdog sought intervention after reviewing Metropolitan Direct’s rate application and finding several errors and unsupportable assumptions that resulted in the company seeking excessive rates in violation of California's insurance reform law, Proposition 103.
Among other things, Consumer Watchdog determined that the company was improperly estimating its future claims and the ultimate cost of pending claims and failed to provide data required by the Department. The company withdrew its application two days after the Commissioner granted Consumer Watchdog’s intervention. The rate request would have affected approximately 78,000 California drivers covered by Metropolitan Direct.
“The quick withdrawal indicates that the company knew its rate increase request was improper. This is exactly why Proposition 103 gave consumers the right to challenge insurance rates,” said Todd M. Foreman, Consumer Watchdog staff attorney.
Californians Should Have As Much Protection for Health Insurance Premiums
Proposition 103, passed by the voters in 1988, requires insurance companies to receive Department of Insurance approval for any rate hike before it can take effect and gives consumers the right to challenge excessive rates at the California Department of Insurance and in the courts. The law saved California drivers more than $62 billion on auto insurance premiums alone through 2006, according to a 2008 study by the Consumer Federation of America.
Prop 103, however, does not apply to health insurance rates. Consumer Watchdog and other consumer groups are working with Assemblyman Mike Feuer of Los Angeles and Insurance Commissioner Dave Jones to pass AB 52 (Feuer), which would apply a similar system of rate regulation to health insurance sold in California.
“While California regulators have the power to say no to unfair auto and home insurance rate hikes, health insurance companies can charge whatever they want,,” said Douglas Heller, Executive Director of Consumer Watchdog. "In 2014 everyone is going to be required to buy health insurance, just as we have to buy car insurance, so we should have at least as much protection on our health premiums as we do on our auto premiums."
AB 52 is scheduled to be considered by the Assembly Health Committee on Tuesday April 26th.
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Consumer Watchdog is a non-partisan public interest organization with offices in Santa Monica, CA and Washington, D.C. For more information, visit is on the web at http://www.ConsumerWatchdog.org