Insurers sue to block rate-setting rules;

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San Jose Mercury News (California)

Insurers struck back against new California regulations that will change the way companies set auto policy premiums, saying in two lawsuits filed late Wednesday in Sacramento Superior Court that the rules will force them to charge customers more for car insurance.

The insurance companies also say filing adjusted rate plans by next month isn’t doable. Last week, Insurance Commissioner John Garamendi won approval for rules that will force insurers to calculate rates primarily on people’s driving records, not on where they live.

“We felt the right thing to do was to file a lawsuit and ask a judge to kind of call timeout and make a judgment over whether or not these regulations are valid,” said Sam Sorich, president of the Association of California Insurance Companies, which represents companies that have about 50 percent of the policies in the state.

The insurance industry and Farm Bureau said in separate lawsuits that the regulations will raise customer rates, particularly for residents who live in rural areas. Meanwhile, consumer advocates railed against the companies, saying the new rules will actually decrease consumer rates.

In the past, insurance companies calculated premiums by deciding how much weight to give to 19 factors, which include a person’s gender and marital status.

Under the new regulations, which build on Proposition 103 passed by voters in 1988, insurance companies are required to weigh three main factors — a driver’s record, years of experience driving and how far they drive — more heavily than other factors, such as ZIP codes, when calculating premiums.

The insurance companies “are dragging their feet in the mud,” said Douglas Heller, executive director of the Foundation for Taxpayer and Consumer Rights, a non-profit consumer group. “They just want to charge drivers as much as they want if they live in communities that they don’t like. This is a last-ditch effort.”

The court fight could take years to settle, much like previous lawsuits over the details of Proposition 103, said Norma Garcia, senior attorney for Consumers Union in San Francisco. The court is scheduled to decide in early August whether the insurance companies should be excused from following the new rules while the cases are debated.

Aside from increased costs coming from the way rates are calculated, insurers said the significant cost of developing and implementing the new rates will eventually “be borne by consumers,” according to court documents.

Garamendi said Thursday that insurers needed to “wake up, stop fighting the reforms, and do what’s best for their customers.”

Some companies have chosen not to fight. The Automobile Club of Southern California said it would base policy prices on how safely and how much its customers drive, rather than primarily on where they live. The club estimates that 88 percent of its 1 million policyholders would see rates decrease or stay the same under the new calculations.

AAA of Northern California has also said it will comply, according to the insurance commissioner’s office.

“I think every customer should call their company and ask if they’re part of the suit and then look for a company that’s willing to play by the rules,” Heller said.
Contact Sarah Jane Tribble at [email protected] or (408) 278-3499.

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