Homeowners Rates Also Too High, Customers Deserve 30% Decrease Says FTCR

Santa Monica, CA — Consumer advocates have filed a challenge to block a proposed 25% increase in Fireman’s Fund‘s earthquake insurance rates in a move that could save each of the company’s earthquake customers $356 a year.

The non-profit Foundation for Taxpayer and Consumer Rights (FTCR) also demanded the company decrease its homeowners insurance premiums by at least 30%, more than double the company’s proposed reductions of 7% to 14%. The homeowners premium challenge could save Fireman’s Fund policyholders another $27 million, or approximately $437 per customer.

“A consumer whose earthquake and homeowners insurance are with Fireman’s Fund will pay almost $800 a year too much if the company’s rate plans are approved,” said Carmen Balber, consumer advocate with FTCR. “An unwarranted earthquake insurance rate hike will only have the effect of leaving more Californians uninsured when the big one comes.”

The challenges are being brought under the rules of voter-approved Proposition 103, which requires insurance companies to justify rate changes prior to imposing increases, and allows consumer groups like FTCR to challenge excessive rates and request public hearings. The Insurance Commissioner must grant a hearing if a requested rate change exceeds 7%.

Last month, Insurance Commissioner Poizner announced that he would be seeking refunds from Allstate Insurance for overcharging its homeowners insurance policyholders, in connection with a challenge to that company’s rates brought by FTCR last year.

Experts working with FTCR determined that Fireman’s Fund‘s rate plans fail to meet several rules meant to keep insurance prices fair and appropriate in California. According to FTCR’s formal challenge, the insurer’s requested earthquake rate hike is excessive, includes unjustifiable profit margins and does not use a credible model to determine risk. A substantial decrease in Fireman’s homeowners rates is called for, according to that challenge, because the company does not provide the data necessary to justify its filed rates, uses the wrong time frames to present an inadequate picture of risk, and would pass on to consumers costs that are specifically prohibited by law.

Using Prop 103, FTCR has saved California insurance policyholders over $830 million. Successful past challenges to home insurance rates include:

– Saving State Farm customers $266 million in homeowners premiums with a 20% rate decrease at the end of 2006;

– Blocking a 9.5% rate hike by California Casualty Insurance Company in 2004, saving California homeowners policyholders $3.2 million;

– Blocking a proposed 21.3% proposed hike on 40,000 mobile home owners by State Farm in 2005, providing an average annual savings of $130 to these State Farm customers; and

– Forcing Safeco to cut a proposed hike of its earthquake insurance rates by 58%, saving Safeco customers $19.3 million.

“Californians have the protections of Prop 103 to ensure that when insurance companies try to jack up rates without justification, the public can put a stop to it. Fireman’s Fund must justify its premiums or reduce rates, and excessive rates can’t be justified,” said Balber.

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FTCR is California’s leading public interest watchdog. For more information, visit us on the web at www.ConsumerWatchdog.org.