California Judge Won’t Let Allstate Delay Cutting Auto Insurance Rates

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On the same day a new study dubbed California the nation’s leader in
holding the line on auto insurance rates, a judge in San Francisco
denied Allstate’s bid to delay cutting its rates an average of 15.9
percent as the insurer appeals state action ordering the reduction.

Allstate said Thursday that it will continue to appeal the auto insurance
rate-reduction order issued last month by an administrative law judge.

The rate reductions amount to an average of $124 per vehicle each year,
according to the state Department of Insurance, which disagreed with
Allstate’s proposed rate revision filed in 2006.

San Francisco Superior Court Judge Peter Busch’s ruling Thursday denied Allstate’s attempt to keep current rates in place and could prompt rate reductions as soon as Monday, according to consumer groups.

But the insurer indicated Thursday that it will "explore our options" on that Monday deadline, and court officials in San Francisco declined to comment on it.

In a statement following the judge’s ruling, Allstate spokesman Peter DeMarco said: "Allstate wants to lower its auto rates and reduce the cost of auto insurance in California, especially during difficult economic times for our customers.

"However, the
proposed auto rate reduction Allstate is being asked to take is neither
fair nor reasonable. We are reviewing the details of the court’s ruling
and will continue to explore our options going forward."

ruling came just hours after the release of a Consumer Federation of
America insurance-regulation study that compiled information from all
50 states and the District of Columbia over a 17-year period starting
in 1989.

Insurance premiums in the Golden State rose by 12.9
percent from 1989 to 2005, compared with the national average increase
of 50.2 percent.

The federation, based in Washington, D.C.,
linked California’s rate control to the 1988 approval of Proposition
103, which required insurers to set premiums mostly on driver safety
records, experience and miles driven instead of where motorists live.

fare best under a system of prior approval of insurance rates," said J.
Robert Hunter, CFA’s director of insurance and a former federal and
state insurance regulator.

The federation’s study said rates have
risen more slowly in California and 14 other states that require state
approval of rate increases.

States with so-called "prior
approval" regulation also performed well in spurring competition and
generating significant profits for insurers, the federation said,
noting that the worst-performing states were those with either weak
regulation standards or none at all.

Using projected rate
increases, the federation said California drivers saved $61.8 billion
in auto insurance rates since enacting Proposition 103 in 1988. Over 17
years, that amounted to $1,670 per California ratepayer, the group said.

Rosenfield, author of Proposition 103 and founder of Santa Monica-based
Consumer Watchdog (formerly the Foundation for Taxpayer and Consumer
Rights), called the ruling against Allstate an example of the
proposition’s long-term effectiveness.

"This just confirms what
this morning’s report concludes: That Proposition 103 regulation of
insurance companies has saved California consumers hundreds of dollars
each year," he said.

Allstate filed its appeal two weeks ago,
saying key evidence was excluded from the hearing before the
administrative law judge. The company was given until Thursday to
prepare arguments for a stay that would allow it to keep its rates in
effect while it pursues an appeal.

Allstate’s auto insurance
business is the third-largest in the state, with about 9 percent of the
market, according to Department of Insurance figures. 

Contact the author at:[email protected]

Consumer Watchdog
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