If You Thought Your Auto Insurance Rates Have Been Rising, You’re Right

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Nebraska consumers have seen the nation's biggest percentage increase in auto insurance rates since 1988, a consumer group said Tuesday in recommending that all states adopt tough, California-style regulation of the auto insurance industry.

Iowa's increase has been above-average, too, the Consumer Federation of America said in a report that marks the 25th anniversary of a California law passed by voters as Proposition 103 in 1988.

State officials in Lincoln and Des Moines defended their record, saying the states' regulatory systems encourage competition that helps keep rates well below the national average.

Although State Sen. Mike Gloor of Grand Island, chairman of the Nebraska Legislature's Banking, Commerce and Insurance Committee, said he would look at the report, he said he has heard of no proposals to change the State Department of Insurance's method of reviewing auto insurance policies.

In general, he said, Nebraskans “don't like to see more regulation,” but if stronger regulation could be positive for consumers, “it might be something to look at. … It merits further evaluation.”

The Consumer Federation said household auto insurance spending increased 108.1 percent in Nebraska, the most in the nation; 73.5 percent in Iowa; and an average of 43.3 percent nationally, comparing 1989 and 2010 figures from the National Association of Insurance Commissioners.

But in 2010, the latest year available, Iowa's average insurance spending was the lowest in the nation at $644.63, and Nebraska's $721.08 was 41st, below the national average of $907.38.

Doug Heller, a consultant for the consumer group, said the relatively low population density in Nebraska, Iowa and some other states helps keep rates low because there are fewer accidents. But he said stronger state regulations could keep rates even lower and stop unfair practices by such steps as limiting company profits and excluding some expenses that insurance companies can use to justify rate increases.

J. Robert Hunter, the group's insurance director, said California was the only state with lower auto insurance spending in 2010 than in 1989, a decrease of 0.3 percent. The California law requires the state to approve auto insurance rates before they go into effect, a system known as prior approval, and has other pro-consumer provisions.

“Why not the best practices for regulations?” Hunter asked. “It's time for the other states to take heed and protect their consumers.”

Nebraska and Iowa are among a majority of states that let companies put new rates into effect before or while the rates are reviewed by state officials.

Bruce Ramge, director of Nebraska's Department of Insurance, said the current system is efficient and encourages competition among companies. This year, 108 companies have received auto insurance premiums totaling $100,000 or more, he said, a sign that the market is competitive.

Ramge said auto insurance rates are mostly influenced by population density, the cost of repairs, the cost of medical treatment, prices for cars and competition, rather than by state regulation.

He said comparing rates from 1988 is not appropriate because Nebraska started its current regulatory system for passenger autos in 2005. Rates have gone down slightly since then.

Ramge said the state can question rates or other terms of a policy, but that's rare. He said the system efficiently lets companies change policies quickly — imposing rate reductions as well as increases — so insurers can compete for business.

The state's primary concern is the financial solvency of the insurance companies so that they meet their claims obligations, Ramge said. “We've got to make sure that the companies aren't using rates that would lead to their financial detriment.”

If a company's rates are too high, he said, “people won't buy it. The best thing consumers can do is shop around.”

Tom Alger, a spokesman for the Iowa Division of Insurance, said the agency can call a company if its rates or other provisions in an auto policy are improper.

“There's plenty of competition out there to take their business away if they're moving away from what normal pricing is,” Alger said. This year, 354 companies have issued auto insurance policies in the state.

A national insurance spokesman said the Consumer Federation issues a similar annual report, but the trend among states is to move away from restrictive regulation to encourage competition.

Contact the writer: Steve Jordon

[email protected]   402-444-1080

Steve covers banking, insurance, the economy and other topics, including Berkshire Hathaway, Mutual of Omaha and other businesses.


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