SACRAMENTO, CA — California Insurance Commissioner Steve Poizner said Allstate must slash its automobile insurance rates nearly 16%, an average savings per auto of about $124.

"California’s consumers deserve a competitive marketplace in which to shop around for the best rates that meet their needs," Poizner said in a statement. He called the rate reduction "fair and reasonable for the company."

The order to reduce rates 15.9%, which comes after an administrative law judge heard the case last November, is effective April 14. Poizner said Allstate originally requested no change to its rates in a filing made in 2006, then the company modified the filing to lower rates 7.1%. The California Department of Insurance calculated a 19.4% reduction was warranted.

The administrative law judge agreed with the CDI’s claim that Allstate’s rates needed to be reduced "because they were overly excessive to begin with." Allstate has about 9% of California’s auto insurance market, Poizner said.

Attempts to reach Allstate for comment were not immediately successful.

Poizner said many insurers have lowered auto rates under regulations passed last year that revised guidelines under Proposition 103, which prohibits excessive rates. Californians saved more than $700 million in 2007, he said.

Earlier this month, a Los Angeles Supreme Court ruled California insurance companies must comply with state regulations requiring them to pay the legal and expert fees of consumers or groups that challenge a proposed rate change if the challenge impacts the end result, whether a formal hearing takes place or not (BestWire, March 10, 2008). The Foundation for Taxpayers and Consumer Rights, which helped to defend the proposition, challenged Allstate’s rates.

In a statement, the FTCR said the rate decrease will save nearly 2 million drivers with Allstate policies about $250 million.

"These rate reductions came about because of the prior approval regulations that limit industry excesses and more Californians should see rate decreases soon," said FTCR attorney Todd Foreman. The FTCR called the rate decrease a "stimulus package" for the state’s economy.

The FTCR said it is also challenging "unjustified homeowners insurance rates" requested by Allstate.

Poizner has said he wants Allstate to justify homeowners rates. He ordered the company to show cause for its rates and promised to order the insurer to pay retroactive refunds to policyholders if regulators find premiums are excessive.

Allstate filed for a 12.2% homeowners rate increase in September 2006. Allstate has said it will not write new homeowners insurance in the state but will renew existing homeowners policies if underwriting guidelines are met (BestWire, May 23, 2007).

Allstate Insurance Group currently has a Best’s Financial Strength Rating of A+ (Superior).

In 2006, the top five writers of private passenger auto insurance in California, based on A.M. Best Co. state/line data, were: State Farm Group, with 12.7% market share; Mercury General Group, with 9.7%; Farmers Insurance Group,
with 9.7%; Auto Club Enterprises Insurance Group, with 9.4%; and Allstate
Insurance Group, with 9.3%.

(By Chad Hemenway, associate editor, BestWeek: [email protected])