Schwarzenegger Insurance Tax Unfair to Homeowners, Lets Insurers Off the Hook

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Insurance Interests Have Donated $3.8 Million To Schwarzenegger’s Political Funds, Would Reap Benefit of Plan

Santa Monica, CA — Governor Schwarzenegger’s proposal to add a
1.25% tax on homeowners and business property insurance policies
unfairly forces California consumers to fill Sacramento’s budget gap,
while letting Schwarzenegger’s insurance company donors escape any
burden. Consumer advocates, who are currently challenging several
companies’ excessive homeowner insurance rates, said this tax on
policyholders should be rejected by lawmakers and the Insurance

"The Governor’s attempt to add an insurance tax on consumers
while letting insurance companies off the hook smacks of special
interest favoritism and will raise insurance premiums for California
homeowners and businesses," said Douglas Heller, Executive Director of
The Foundation for Taxpayer and Consumer Rights (FTCR). "Shared
responsibility does not mean making average Californians pay while the
Governor’s insurance company donors’ just deliver the check to

Insurance companies have contributed $3.8 million to Governor
Schwarzenegger’s campaigns. A portion of the policyholder tax would
reportedly fund certain regional firefighting needs. While insurance
customers around the state will be forced to pick up the tab for these
efforts, the insurance companies will presumably reap the financial
benefit, through fewer claims and lower wildfire payouts. If insurance
companies are going to save money as a result of this program, they
should be responsible for paying the tax, advocates said.

Schwarzenegger’s Homeowners’ Insurance Tax is Unfair; Treats Similar Families Differently

The proposed 1.25% homeowners insurance tax would unfairly
distribute the tax burden, FTCR said, as the following examples using the Department of Insurance premium comparison site demonstrate (click here to view site):

* A homeowner who buys a $250,000 policy in Culver City,
California from Nationwide Insurance would pay more than twice the
insurance tax that their neighbor with AAA pays for the same coverage.
They’d pay about 400% more in taxes if they are insured by Century

* A State Farm customer living in South Central will pay about
30% more homeowners insurance tax than State Farm customers buying the
same coverage in nearby Palos Verdes;

* Californians who choose to purchase earthquake insurance will
pay a double tax compared with residents who forego an earthquake
policy; and,

* Homeowners who pay more as a result of the insurance
industry’s insidious "Use It and Lose It" practice of charging more to customers if they file a claim will also have to pick up more of the
state’s tax burden.

"Fair taxation requires that people get treated according to a
consistent and equitable system, but Governor Schwarzenegger’s plan
says that two families with the same income, purchasing the same
product must pay different amounts. It’s shocking that this plan made
it out of the ‘bad ideas’ file," said Heller.

Homeowners Already Paying Too Much; Group Challenging High
Home Insurance Rate Plans by Allstate, Farmers, Fireman’s Fund, GeoVera

FTCR will contest a 13.7% homeowners insurance rate hike
proposed by Allstate at a Department of Insurance hearing next week.
The group says that Allstate is trying to illegally boost profits by
overcharging California customers in violation of the 1988
voter-approved insurance reform measure Proposition 103. According to
FTCR’s data, Allstate customers should receive a 30% cut, for an
average savings of $374 per policyholder. At the same time, the group
is also challenging a proposed homeowners rate hike by Farmers
Insurance, earthquake insurance rates charged by Geo Vera Insurance and
both the homeowner and earthquake rates at Fireman’s Fund. All told,
FTCR estimates that the four insurance companies want to overcharge
Californians by nearly $650 million.

"The Governor shouldn’t force a new tax on consumers as
another giveaway to the insurance industry that is already overcharging
California homeowners by hundreds of millions of dollars a year," said

Using Prop 103, FTCR has helped Californians save more than
$800 million by challenging other companies’ auto, homeowners, and
medical malpractice insurance rate proposals since 2003. A full list of
these savings is available by clicking here.

FTCR is investigating whether the Governor’s proposed
homeowners’ tax violates Proposition 103’s prohibition on unapproved
insurance rate hikes.

Group Says Proposal Raises Questions About Role of Schwarzenegger’s Deputy, a Former Insurance Lobbyist

FTCR noted that Governor Schwarzenegger’s Deputy Chief of Staff
was apparently involved in the development of this proposal. Dunmoyer
was the insurance industry’s top lobbyist in California before leaving
to work for the Governor. FTCR said that Dunmoyer’s involvement in the
development of this plan to make homeowners pay a tax that would help
insurance companies is more evidence of the undue influence insurers
wield in the Governor’s office.

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FTCR is California’s leading public interest watchdog. For more information, visit us on the web at

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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