SACRAMENTO, CA — Some California drivers suffering through the toughest economic conditions in three decades got a rare bit of good news Thursday when the state’s biggest auto insurance company announced it would cut rates for 3.3 million motorists.
Premiums at State Farm Mutual Automobile Insurance Co. will drop by 8% for a total savings of $219 million, said Rand Harbert, the senior vice president for California.
Customers will see the drop in rates when new policies are bought or when current ones are renewed starting July 6.
State Farm spokesman Bill Sirola cited a number of factors for the rate cut, which is expected to save 665,000 Los Angeles-area customers of State Farm Mutual Automobile Insurance about $75 a year each, on average.
"There are fewer accidents," Sirola said. A slowing economy and concern about high fuel prices are causing people to drive less, while safer cars and stricter law enforcement have reduced losses from damage claims.
The latest State Farm rate cut is the company’s fourth since 2004, the company said. Other major California insurers, among them the automobile clubs of Northern and Southern California, Mercury General Corp., Geico Corp. and 21st Century, lowered auto rates during the last five years.
State Farm is doing the right thing "passing company savings along to policyholders," said California Insurance Commissioner Steve Poizner, who announced the rate cut along with insurance executives at a Thursday media event in Los Angeles.
But the company had to be prodded into reducing premiums as much as it did, said Douglas Heller, executive director of Consumer Watchdog, a Santa Monica group that advocates on behalf of policyholders on regulatory matters before the state Department of Insurance.
State Farm last year originally asked Poizner to lower rates by about $88 million, Heller said. Consumer Watchdog argued that a $350-million reduction would be justified, and Poizner approved a cut of $219 million.
"Even with this rate decrease," Heller said, "State Farm customers will be paying more than they should be for the auto coverage they are getting."
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