Proposition 103 Invoked to Prevent State Farm’s Third Steep Increase in Four Years
Santa Monica, CA — A California consumer group seeks to block State Farm from overcharging mobile homeowners for their insurance. The nonprofit Foundation for Taxpayer and Consumer Rights (FTCR) filed a challenge with the California Department of Insurance yesterday asking Insurance Commissioner John Garamendi to hold a public hearing to determine whether State Farm‘s proposed $4 million rate hike violates the landmark insurance reform initiative, Proposition 103.
The 21.3% increase proposed comes on the heels of a 47.7% increase in 2002 and a 22.3% increase in 2001 by State Farm on this line of insurance. If its current application is approved, State Farm will have raised its rates by approximately 120% in the past four years for its 40,000 California mobile homeowners insurance policyholders.
“This is an attempt to gouge mobile homeowners who should not be forced to absorb State Farm‘s bloated overhead,” said Lawrence Markey, Jr., staff attorney for FTCR. “At a time of record profits, State Farm should be lowering its insurance rates, not requesting another double-digit rate hike.”
FTCR’s analysis indicates that State Farm‘s request is excessive because it (1) inflates the insurer’s estimated future losses, (2) seeks an excessive profit, and (3) includes an excessive provision for overhead expenses.
Under California’s Proposition 103, insurers must first seek the approval of the Department of Insurance before raising or lowering insurance rates. Any member of the public can challenge any company’s request to change rates. FTCR has frequently used the initiative statute to successfully challenge homeowners insurance rate increases in the past. FTCR recently blocked a 9.5% rate hike by California Casualty Insurance Company, saving California homeowners $3.2 million.
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