Santa Monica, CA – California consumers and small business owners saved $246 million dollars on their insurance in 2016 thanks to public rate challenges brought by Consumer Watchdog under insurance reform initiative Proposition 103.
At the same time, State Farm is in San Diego Superior Court trying to reverse some of those homeowner rate savings, and a refund ordered by Insurance Commissioner Dave Jones. Consumer Watchdog and Consumer Federation of California represent consumers in that proceeding, through Prop 103’s public participation process.
On Tuesday, the state Court of Appeal in Sacramento heard an appeal by Mercury Insurance and industry trade groups of a 2009 order requiring Mercury to cut unjustified insurance rates. The insurers are asking the court to overturn California Supreme Court cases that upheld the Proposition 103 regulations barring excessive rates.
And reports indicate the Personal Insurance Federation is looking to sponsor legislation targeting Prop 103’s public participation process this year. The funded public participation or “intervenor” process was created to level the playing field and ensure consumers have the resources to hire the technical experts – including economists, actuaries, geologists and attorneys – needed to go up against the insurance industry’s deep pockets.
In the face of these industry attacks on Prop 103’s insurance reforms, it is no surprise that insurers were also the voice behind critics of the public participation process in a recent Sacramento Bee article.
Since 2002, Consumer Watchdog rate challenges have saved policyholders $3.2 billion on their auto, home, condo, earthquake, commercial and medical malpractice insurance rates.
“$3.2 billion in savings from Consumer Watchdog rate challenges are 3.2 billion reasons the insurance industry wants to prevent consumers from having a voice to challenge excessive insurance rates,” said Carmen Balber, executive director of Consumer Watchdog. “Prop. 103 is the insurance industry’s white whale, and consumers’ ability to inspect their books for price-gouging is the feature insurers hate most of all.”
“Twenty eight years after the voters passed Proposition 103, the insurance industry is mounting a multi-pronged legal assault across the state on the reforms that have kept rates low for motorists and homeowners in California,” said Harvey Rosenfield, the author of Proposition 103. “But the courts have emphasized that the insurance industry has no constitutional right to rip us off.”
Recently, two opponents of Proposition 103 began speaking out against the public participation or “intervenor” process in the media, without disclosing that they speak for the insurance industry.
One, William Gausewitz, lobbied for the insurance industry for more than a decade, representing the American Insurance Association and Farmers Insurance before becoming a regulator. After leaving government Gausewitz returned to the insurance industry, representing them at law firm Michelman & Robinson in 2009, and is currently a shareholder in the Greenberg Traurig’s insurance regulatory practice. A second is the right-wing R Street Institute, where two of six board members are from the insurance industry, State Farm and RenaissanceRe.
Proposition 103 requires insurance companies to open their books and justify rates before they are approved. It also funds consumer groups to participate in that scrutiny. Although consumer organizations challenge only a small fraction of rate filings, the process is highly effective. For every 30 cents paid to Consumer Watchdog and its outside experts in rate challenges, consumers saved $100.
California drivers have saved over $100 billion since voters passed Prop 103 in 1988, according to a 2013 report on state auto insurance regulation by the Washington DC-based Consumer Federation of America. The report found that California is also the only state in the nation where auto insurance rates have gone down since 1988, by 0.2%, while the average rate increase across the nation was 47%. Although many states require insurance companies to get approval for auto rate changes, California is the only state with a funded intervenor process. California’s auto insurance market is the 3rd most competitive in the nation, and auto insurers’ profitability in California is above average.
See the chart of rate savings from Consumer Watchdog rate challenges, 2002-2016: http://www.consumerwatchdog.org/sites/default/files/ratesavingschart-1-3-17.pdf
Read the Consumer Federation of America report: http://www.consumerwatchdog.org/resources/whatworks_nov2013_hunter-feltner-heller.pdf