Report Praises Pennsylvania Car Insurance Model

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Pennsylvania, California and 13 other states that require auto insurance companies to get prior approval before they can raise rates do the best job of keeping insurance premiums in check, according to a report by the Consumer Federation of America.

While auto insurance premiums nationwide have risen an average of 43 percent from 1989 through 2010, rates in Pennsylvania increased an average of 26 percent, the report from the Washington, D.C.-based association of nonprofit consumer groups said. Only Hawaii, New Hampshire, New Jersey and Massachusetts posted lower overall increases.

California was the only state where rates fell, dropping by 0.3 percent.

Still, Pennsylvanians paid an average premium of $812.15 in 2010, slightly higher than the national average of $791.22, the report said. In California, the average premium was $745.74.

As the consumer organization has done in the past, the report praised California as the model for insurance reform. Since stiff regulations took effect in 1988 under the reform measure known as Proposition 103, California consumers have saved an estimated $100 billion on insurance premiums.

"The important message to policymakers, insurance companies and consumers across the county is that strong regulation of the insurance market is what works," the organization's insurance consultant Doug Heller said in a conference call Tuesday. The experience in California "shows that good regulation can spur competition rather than hinder it."

The organization lauded California for curtailing some of the industry's "most anti-consumer practices," citing a prohibition against using credit scores to set rates, and tempering the influence of other non-driving rating factors such as marital status and ZIP code by requiring that the most weight be given to a motorist's driving record. Miles driven and years of experience are considered next.

California also forces insurers to give a 20 percent discount to consumers with good driving records.

Pennsylvania Insurance Department spokeswoman Melissa Fox said the department had not seen the full report and couldn't comment on it.

Pennsylvania does not mandate good-driving discounts, but many companies voluntarily offer them, she said.

The state's regulations also do not force insurers to consider driving record or any particular factor more heavily in setting rates, nor does it stop insurers from using credit scores as a factor, Ms. Fox said.

Pennsylvania does, however, prohibit insurers from using credit scores at renewal time, unless they would lower the premium, she said.

The full CFA report is available at

Patricia Sabatini: [email protected] or 412-263-3066.

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