LOS ANGELES, CA — California’s chief insurance regulator said Thursday he has approved an 8 percent rate cut amounting to $219 million in savings for State Farm auto insurance policyholders in the state.
The rate reductions, which will go into effect starting July 6, would save an average of $66 annually for each of the 3.3 million customers in California, Insurance Commissioner Steve Poizner said.
"It is encouraging that in these tough economic times, the largest auto insurer in the state is passing company savings along to policyholders," Poizner said in a statement.
Consumer advocates say the savings could have been lower.
Doug Heller, the executive director of Consumer Watchdog, said State Farm proposed last year to lower auto insurance rates by 3.2 percent or about $88 million as required by state law. Heller said his Santa Monica-based group challenged the proposal, arguing the company was relying on one year’s worth of data for determining its loss trends, which are used to predict future losses and to set the rate. Heller said insurance providers were previously required to consider three years’ worth of data on losses, but Poizner loosened the rule last year.
Consumer Watchdog reviewed three years of State Farm data and argued the rates should be dropped by about $350 million or 13 percent, Heller said.
"It’s not enough to lower rates a little bit when they’re required to be lowered a lot," Heller said. "If Commissioner Poizner hadn’t weakened consumer protection last year, consumers would be saving a lot more."
Poizner’s spokesman Darrel Ng said the insurance commissioner had to choose between making a deal for the $219 million reduction or risk having it reduced or increased at a hearing before an administrative law judge. Ng said that process could have taken months.
"Commissioner Poizner chose to reduce rates immediately, especially because of this tough economy when everyone could use every additional dollar," Ng said.
Ng said Poizner has saved insurance rate payers nearly $2 billion since he took office in January 2007.
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