THANKS TO FAVORABLE ACCIDENT AND CLAIMS RATES, CALIFORNIA’S FOUR LARGEST CARRIERS WILL LOWER PREMIUMS FOR THE FIRST TIME IN YEARS

Press Democrat (Santa Rosa, CA)

HOME INSURANCE:

State Farm: 20 percent decrease

Farmers: 18 percent decrease

Safeco: 20 percent decrease

USAA: 22 percent decrease

AUTO INSURANCE:

State Farm: 10 percent decrease

Farmers: 3.9 percent increase

Safeco: Unchanged

USAA: 8 percent decrease

After years of soaring premiums, California consumers are about to see some relief from their insurance carriers.

Starting later this year, the state’s biggest insurers will cut their rates for auto and homeowners coverage, marking the first broad decline in years.

“I can’t remember when we’ve seen rates go down like this,” said Norma Garcia, an attorney for Consumers Union in San Francisco. “Consumers have been waiting for it.”

Overall, insurers will cut their rates by more than $1.6 billion this year, a 10 percent reduction, according to the Department of Insurance.

Most California policyholders will see savings when they renew their policies for 2007, said Doug Heller, executive director at the Foundation for Taxpayer and Consumer Rights, an industry watchdog group in Santa Monica.

“It’s great news,” Heller said. “We’re talking about some real money.”

The rollbacks give consumers a rare opportunity to hunt for bargains, he said. “Now is one of the best times to shop for insurance,” said Heller. “There will be opportunities to lower your rates.”

The reductions stem from a combination of factors. Insurers have been posting record profits, spurred by investment gains and lower payouts for claims.

U.S. carriers were helped by a mild hurricane season in 2006. Worldwide, insured losses from natural disasters dropped 85 percent from 2005, when Hurricane Katrina and other storms caused billions of dollars in damage.

In California, insurers faced intense regulatory pressure in 2006 to lower their rates. Last June, former State Insurance Commissioner John Garamendi ordered four of California’s largest carriers to justify their rates for homeowners coverage.

Allstate, State Farm, Farmers and Safeco — which control more than half of California’s market for homeowners insurance — were paying less than 50 cents of each premium dollar to settle claims, Garamendi said.

He threatened hearings to force them to roll back rates under Prop. 103, a California law that limits “excessive” insurance company profits.

Insurers denied they were making excess profits, saying they were simply building reserves to cover future claims.

Still, carriers began announcing rate reductions for homeowners coverage last September. While they cited improved market conditions, Garamendi and consumer groups claimed credit for forcing the price cuts.

Meanwhile, most carriers last year dropped their fight against California’s “good driver” regulations for setting auto insurance premiums.

The regulations, mandated by Prop. 103, require carriers to base rates for auto coverage primarily on policyholders’ driving records.

Previously, insurers had used policyholders’ ZIP codes as key criteria for rates, arguing they were good indicators of risk.

Consumer groups pushed for the good driver rules, saying they would result in savings for safe motorists regardless of where they live.

Last month, State Farm, the state’s leading auto insurer, announced the largest rate cuts in its history for California customers. The company’s 3 million auto and 1.4 million homeowners policyholders will see nearly $500 million in savings, the company said.

State Farm‘s auto customers will save 10 percent, and homeowners, condo owners and renters will save 20 percent. The new rates, which go into effect in March and April, are triggered when customers renew their policies.

The cuts are due to favorable accident and claims trends, according to State Farm officials.

“Our experience has been pretty favorable over the past several years,” said Lonny Haskins, spokesman at State Farm‘s operations center in Rohnert Park.

The company decided to pass its savings on to customers, he said.

Statewide, auto and home insurers filed notice they’ll trim rates by more than $1.6 billion.

Auto insurers have filed for more than $1 billion in reductions since last August. Fourteen of the state’s 15 largest insurers, representing about 97 percent of policyholders, are seeking rate cuts or no change in rates.

California consumers, who spend about $10.7 billion a year on auto coverage, will see rates go down approximately 10 percent, on average.

Homeowners insurance rates will drop about 8 percent, on average, for a savings of about $500 million. Californians spend about $6 billion a year on homeowners coverage.

Not all carriers have joined the movement. Allstate is seeking approval for a 12 percent hike in homeowners rates. Consumer groups are challenging Allstate‘s request and the Department of Insurance has ordered the company to justify the increase.

“We’re confident their rates will come down,” Heller said.

The rate rollbacks mean more competition for customers’ dollars, said Nancy Wales, division manager at NorthWest Insurance Agency, a large independent broker based in Santa Rosa.

“Everybody’s hungry for business these days,” she said.

Agents don’t want to lose customers to lower-cost carriers, she said. “It behooves an agent to be smart and treat your clients well,” said Wales.

Policyholders should check with their agents to make sure they are getting the right coverage and discounts, she said.

In some cases, carriers are boosting their discounts for longtime customers, said Josh Johnsen, a partner at George Petersen Insurance Agency in Santa Rosa.

“We’re seeing happier clients,” he said.

No one’s sure how far the rollbacks will spread or how long they’ll continue. Garamendi, a Democrat, was forced out of the Insurance Commissioner‘s office by term limits last year and was elected lieutenant governor in November.

The new Insurance Commissioner, Steve Poizner, pledged to continue monitoring the industry closely.

“Proposition 103 is crystal clear,” he said. “I’m going to make sure rates are not excessive.”

Poizner, a Republican and Silicon Valley entrepreneur, said he’ll also take other steps to reduce insurance costs, including a crackdown on fraudulent claims and a program to reduce the number of uninsured drivers.

Consumer advocates said it’s too soon to say how Poizner will regulate the industry.