Changes By Poizner Earlier This Year Led to Rate Hikes And New Proposal Will Lead to Even Higher Rates for Individuals, Businesses
San Francisco, CA — California Insurance Commissioner Steve Poizner has come under attack from consumer advocates for a proposal to deregulate insurance rates and allow insurance companies to raise rates on homeowners, motorists and business policyholders. The Poizner plan, which faces a public hearing in San Francisco today, would allow insurers to defy important insurance reforms established under Proposition 103 that have saved Californians nearly $600 million on their insurance premiums in 2008 alone.
In testimony to the Commissioner today, insurance reformer Harvey Rosenfield, who authored the 1988 insurance measure Prop 103, said:
“The current proposals are a windfall for insurance companies that will force California consumers to pay far more for insurance than they do now. They amount to deregulation of insurance rates at a time when the nation is grappling with the disastrous cost of two decades of deregulation of the financial markets. Were these changes to take effect, the cost to Californians will be in the hundreds of billions of dollars.”
Read Consumer Watchdog’s statement.
The plan presented today marks the second time this year that Poizner has sought to eviscerate consumer protection regulations. That move, last spring, has already led to insurance rate hikes and over $300 million in pending rate increase requests by eight major insurers, according to a new analysis issued today by the nonprofit, nonpartisan Consumer Watchdog. The rules under consideration today would cause rates to skyrocket by the billions, said Consumer Watchdog.
In press announcements during his term as Commissioner, Poizner has touted $1.8 billion in insurance rate cuts he ordered, but failed to acknowledge that the rates were slashed under the old Prop 103 regulations developed by his predecessor, Lieutenant Governor John Garamendi. Since Poizner’s Spring 2008 regulations took effect there has been a dramatic shift away from rate decreases to increases. Indeed, two companies that were recently ordered to substantially decrease rates under the Garamendi regulations – Allstate and Mercury – have now requested rate increases under Poizner’s rules.
The additional rules proposed today would:
* Allow insurers to delay full implementation of substantial rate cuts;
* Allow insurers to decrease rates without full Department review and public scrutiny that is necessary to ensure that decreases are sufficient and also to protect against irresponsible financial practices, akin to the sub-prime lending and workers compensation disasters of recent years;
* Get rid of rules that strictly limit the way insurance companies project claims payouts; and,
* Increase the amount of expenses that companies are allowed to pass through to customers and limit the incentives for more efficient companies.
In addition to these proposed changes, Poizner is soliciting suggestions for ways to allow companies higher profits. Today’s proposal would delete Poizner’s previous attempt to do this in the Spring 2008 rules because it was so poorly crafted as to be unworkable.
Read a chart of the changes and their potential impact.
In his testimony, Harvey Rosenfield said:
“California voters expect the Insurance Commissioner they elected to protect their right to fair premiums. Even Insurance Commissioner Quackenbush, whose fealty to the insurance industry knew no bounds, knew better than to meddle with the prior approval regulations during the six years before he was forced to resign in disgrace…. For twenty years, we at Consumer Watchdog have worked to enforce the law that the voters passed twenty years ago. We will not stand idly by while the law is undermined and its consumer protections are dismantled.”
Earlier this year, the Consumer Federation of America, in a study of the nation’s insurance regulatory regimes, lauded California’s Proposition 103 regulatory system as the best in the nation. The study reported that Prop 103 has saved California drivers $62 billion on auto insurance over the past twenty years. The study was issued before Commissioner Poizner began undoing Proposition 103 protections in the spring. Read more about the study here.
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Consumer Watchdog, formerly The Foundation for Taxpayer and Consumer Rights, is a nonpartisan, nonprofit organization.