Firms accused of inflating premiums for formerly uninsured drivers

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San Francisco Chronicle

Three auto insurance companies have been accused of violating a state insurance reform law by allegedly overcharging some customers who were previously uninsured, according to a lawsuit filed by a consumer group.

The plaintiff is the Proposition 103 Enforcement Project, a Santa Monica watchdog of the 1988 voter-enacted insurance reform law. The group says the insurers calculated premiums in a manner not approved by the California Department of Insurance.

The suit, filed Friday in Los Angeles County Superior Court, names as defendants Geico, based in Washington, D.C.; Safeco, based in Seattle; and the Automobile Association of Southern California, based in Santa Ana.

Spokesmen for Geico and Safeco said the companies have no comment, while Carol Thorp of the Auto Club said the company is “perplexed” by the suit, because Prop. 103 permits numerous factors to be weighed in setting premiums, including prior insurance coverage.

The plaintiff, a division of the nonprofit consumer advocacy group Foundation for Taxpayer and Consumer Rights, seeks to block the insurers from increasing automobile insurance premiums for drivers who lack prior auto insurance coverage. The group says the insurers have been charging that category of drivers higher premiums even when some would be considered safe drivers eligible for Prop. 103’s good driver discount.

Pamela Pressley, a spokeswoman for the consumer group, said Prop. 103, among other reforms, requires that consumers who are entering the insurance market not be penalized for the absence of prior insurance coverage.

She said the practice of charging higher rates to people in this category, compared with previously insured drivers with the same driving history, is a violation of Prop. 103. In some cases, premiums for previously uninsured drivers have been doubled, said Pressley.

She said the three defendants are the only insurers the group says are overcharging these drivers, “but there may be others.”

In Santa Ana, Thorp of the Auto Club said, “We are in full compliance with Prop. 103. All our ratings have been approved by the Department of Insurance.”

According to the Department of Insurance, the Automobile Club of Southern California has 8.3 percent of the California auto insurance market, while Safeco has 1.5 percent and Geico has 1.1 percent. The state also estimates that 20 percent of drivers are uninsured.

Consumer Watchdog
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