Consumers Paying Millions More as Quackenbush Reverses 103 Gains
Contradicting recent public statements by California Insurance Commissioner Chuck Quackenbush, the average combined auto insurance premium (the sum of the averages of liability, collision and comprehensive premiums) paid by motorists in California shot up 8.3% in 1995, Mr. Quackenbushís first year in office, according to the latest data published by the National Association of Insurance Commissioners (NAIC). California consumers paid an average of $73.21 more than they did in 1994 as a result.
The average premium for liability coverage — increases in which led to Prop. 103 nine years ago — rose 4.6% in 1995 from the prior year (an average increase of $22.73 per insured). By contrast, the state’s average auto liability premium had decreased three years in a row before Quackenbush took office (and had decreased 4.5% between 1989 and 1994). The 1995 increases in both the average liability premium and combined average premium are the largest since the passage of Proposition 103. The increases all but wipe out the gains made by Prop. 103 since its passage.
While the data shows that Proposition 103, the insurance reform approved by California voters in November 1988, has achieved its goal of lowering and stabilizing the growth of auto insurance premiums, Commissioner Quackenbushís laissez faire approach to the industry in constant disregard of Proposition 103‘s requirements has begun to reverse the gains 103 has made for consumers.
“Commissioner Quackenbush has been parading around the state claiming he is lowering auto insurance premiums; but this data shows that in his first year in office, Commissioner Quackenbush in fact was responsible for the largest single increase in the average price of auto insurance in California since the voters approved Prop. 103,” said Harvey Rosenfield. “The increases are not surprising, since Commissioner Quackenbush has routinely favored the interests of the insurance industry over taxpayers, consumers and businesses since the day he took office.”
Quackenbush won election to the post in November 1994, to fill the vacancy created by the departure of John Garamendi. In a controversial action, Quackenbush accepted $2.5 million, roughly 70% of his campaign funds, from the insurance industry during his 1994 campaign. Since then, he has received another $3.5 million in contributions to various campaign funds he controls from the insurance industry he regulates, for a total of $6 million.
Prop. 103 Has Saved Consumers Nearly $15 Billion So Far
Proposition 103 mandated a 20% rollback in auto, homeowner and business premiums; it instituted stringent controls on insurance company profiteering, waste and inefficiency, ended monopolistic insurer practices and made the insurance commissioner an elective office.
The NAIC data shows that compared to the nation, 103 has succeeded in restraining increases in the price of car insurance, particularly in the area of auto liability insurance, in which double-digit rate increases were common prior to 103:
- The average auto liability insurance premium decreased by 0.1% in California between 1989 and 1995, while the average premium throughout the rest of the nation increased 32.2% in the same period.
- California is one of only two states to see a decrease during that period (the other is Georgia).
- Because of its impact on premiums, Proposition 103 has saved California motorists an estimated $14.7 billion on private passenger automobile insurance since 1990, according to a statistical projection. This does not include over $1.18 billion in Proposition 103 refunds paid to California motorists under its rollback requirement.
- In 1989, California had the 2nd highest average liability premium in the nation. In 1995, it ranked 11th (up from 12th in 1994).
- In 1989, California had the 3rd highest combined average premium in the nation. In 1995, it ranked 7th (up from 8th in 1994).
Premiums Rising Under Quackenbush
Reviewing data from Commissioner Quackenbushís first year in office, a more disturbing trend appears.
- Every year since 1990, California has had one of the six slowest rates of auto liability insurance premium growth in the nation. By 1994, the last year of Commissioner John Garamendiís term, California ranked 47th. In 1995, however, California zoomed back up to the 10th highest annual rate of growth in the nation.
- California’s average liability premium in 1995 rose to $518.75, the first annual increase in four years. Compared to the 1994 average, this increase has cost California motorists nearly $205 million in premiums in 1995 for auto liability alone.
- The state’s combined average premium (the sum of the averages of liability, collision and comprehensive premiums) in 1995 shot up 8.3% from the previous year, the second largest increase in the nation. The combined average premium in 1995 was $960.54. During the administration of Quackenbush‘s predecessor, John Garamendi (1991-94), such averages for combined premiums ranged between $886.18 and $897.31.
Pro-industry actions taken by Commissioner Quackenbush in his first two years in office have set California on the path toward higher premiums and stirred enormous controversy over Quackenbush‘s independence from the insurance industry. Many of Quackenbushís actions have led to lawsuits by consumer organizations seeking to order him to obey and implement state laws.
- Commissioner Quackenbush lifted his predecessorís freeze on insurance rate increases and approved such increases at the rate of nearly one each day for all lines of insurance since he has been in office. In violation of 103, Commissioner Quackenbush has failed to institute the regulatory formula needed to govern the process of reviewing and approving rate increases.
- While the Prop. 103 rate freeze and refunds have achieved dramatic premium savings for California motorists, auto insurance profits remain excessive, and further premium reductions are justified. Yet, Commissioner Quackenbush has refused to use his authority under 103 to order rate decreases.
- In violation of a specific provision of Proposition 103, Quackenbush has approved rate plans filed by insurers which allowed them to surcharge previously uninsured good drivers by as much as 30% in some cases. In response to a lawsuit by consumer groups, a San Francisco Superior Court judge reversed the Commissioner’s decision. However, the Commissioner has refused to order insurers to cease the unlawful surcharges.
- Commissioner Quackenbush has unlawfully linked insurers’ implementation of the long-overdue ‘good-driver’ provisions of Prop. 103 to Prop. 213, provisions of which are under judicial challenge and were determined to be unconstitutional by a Superior Court judge on Friday, April 4. Any delay caused by efforts to postpone 103ís provisions while Prop. 213 is litigated will result in another lawsuit against Mr. Quackenbush.
Last month, the Proposition 103 Enforcement Project discovered that some California premium data is missing from the NAIC report. The NAIC was not aware of the problem until it was contacted by the Project. NAIC officials confirm this discovery, and tell us that Commissioner Quackenbush‘s Department of Insurance has failed to provide the NAIC with complete data.