Santa Monica, CA — California has the best automobile insurance regulation in the nation, with the slowest-growing premiums and one of the most competitive markets in the country, according to a state-by-state study the Consumer Federation of America released in Washington DC today. In 1988, California voters approved Proposition 103, which enacted the nation’s toughest insurance reform.
The report concludes that California stands out as a model of consumer protection:
• California drivers have saved $61.8 billion in auto insurance rates since enacting the strongest regulation in the nation, an average of $1670 per Californian;
• California is first among all states in holding down insurance premiums, with a 12.9 percent increase compared to an average national increase of 50 percent;
• California is the fourth most competitive auto insurance market in the nation; Completely unregulated Illinois ranks 44th; and
• Changes to auto insurance rules that will take effect this summer will continue to lower rates for good drivers.
“Twenty years ago, Californians got fed up with paying exorbitant insurance rates to feed the insatiable greed of the insurance industry, so they took matters into their own hands and passed Prop 103,” said Harvey Rosenfield, author of Proposition 103. “After two decades of fighting the insurance industry in court, the industry’s political allies in Sacramento and their endless pressure on the Insurance Commissioner, Proposition 103 stands as a massive victory for people’s pocketbooks.”
The full report compares insurance regulatory systems nationally and finds that prices increase for consumers as regulation gets weaker. The Consumer Federation of America press release is available here.
And the full report can be downloaded here.
Auto insurers fare as well as consumers in California, the report finds, with strong profits over the last ten years – 10.1% – and the fourth most competitive insurance market in the nation.
The report highlights other unique aspects of California’s regulatory scheme under Proposition 103 that make the state a national model. California is the only state to:
• Require that a person’s driving record be the most important factor in determining rates;
• Fund consumer participation in the ratemaking process if they make a substantial contribution; and
• Completely repeal its antitrust exemption for automobile insurers
California is also one of only three states to prohibit credit scoring as a factor in setting auto insurance rates, is among eleven states with the strongest seat belt laws, and is one of only four states to guarantee insurance to a good driver from the driver’s insurer of choice.
The report also highlights California’s state of the art prior approval regulations that:
• require insurers to be transparent about how rates are developed;
• prohibit companies from passing on excessive costs including unjustifiable expenses, fines, and excessive executive salaries; and
• set standards to test the assumptions insurers make in setting rates.
Consumer Federation of America argues against federal proposals to weaken state insurance regulation and replace it with looser federal oversight – including recent recommendations by Treasury Secretary Paulson to allow insurers to choose whether to be regulated at the state or federal level. The Consumer Federation report concludes:
Proposition 103 has been an enormous success from both a consumer and an industry perspective. As Congress considers an optional federal charter that would allow insurers to offer coverage in California but be (poorly, if at all) regulated in Washington D.C., it should carefully consider the negative consequences of overriding the will of the voters of the nation’s largest state and undermining the most effective system of insurance regulation in the country.
Read the full report on the website of the Consumer Federation of America.
Ironically, auto insurer Allstate is in a San Francisco Superior Court
today asking a judge to block a 15.9% rate cut for its auto insurance
customers that was ordered by Insurance Commissioner Steve Poizner last
month. Poizner required the approximately $250 million rate reduction
under the very rules of Proposition 103 that are highlighted in the
Consumer Federation study. The rate decrease, which will average $124
per motorist, is set to take effect next Monday if Allstate’s request
for a delay is rejected.
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