California consumers and small business owners saved $246 million dollars on their insurance in 2016 thanks to public rate challenges brought by Consumer Watchdog under insurance reform initiative Proposition 103.
Since 2002, Consumer Watchdog rate challenges have saved policyholders $3.2 billion on their auto, home, condo, earthquake, commercial and medical malpractice insurance rates. That’s 3.2 billion reasons the insurance industry wants to prevent consumers from having a voice to challenge excessive insurance rates.
Yesterday, Mercury Insurance and every insurance trade association in the state were in court trying to overturn consumer protections in Proposition 103 that prevent insurers from earning excessive profits, and prohibit them from making consumers pay for corporate branding campaigns like sponsored golf tournaments. They got a lot of questions, since the courts have already upheld these same provisions.
At the same time, State Farm insurance is defying an order of the Insurance Commissioner and the courts that it reduce homeowner rates by 7%. State Farm is also challenging $100 million in refunds they were ordered to pay in the same proceeding after overcharging policyholders since July of 2015. Consumer Watchdog and Consumer Federation of California represent consumers in that proceeding, through the public participation process the insurance industry would like to eliminate.
And, reports indicate that the Personal Insurance Federation is looking to sponsor legislation this year that would target the funded public participation process that allows consumers to challenge excessive rates. The insurance industry hates that process, because it levels the playing field and ensures consumers have the resources to hire the technical experts – including economists, actuaries, geologists and attorneys – needed to go up against the insurance industry.
So, it wasn’t a big surprise when the insurance industry also launched an attack on Prop. 103 in the Sacramento Bee last week.
The story cited critics of Prop 103 and its public participation or “intervenor” process, but did not disclose that those critics speak for the insurance industry.
One main source, William Gausewitz, lobbied for the insurance industry for more than a decade, representing the American Insurance Association and Farmers Insurance before becoming a regulator. After leaving government Gausewitz returned to the insurance industry, representing them at law firm Michelman & Robinson in 2009, and is currently a shareholder in the Greenberg Traurig’s insurance regulatory practice. Another source is the right-wing R Street Institute, but the story does not mention that two insurance industry executives, from State Farm and RenaissanceRe, comprise one third of the group’s board of directors.
Proposition 103 requires insurance companies to open their books and justify rates before they are approved. It funds consumer groups to participate in that scrutiny. And, although consumer organizations challenge only a small fraction of rate filings, the process is highly effective. For every 30 cents paid to Consumer Watchdog and its outside experts in rate challenges, consumers saved $100.
Despite all the insurance industry angst, it is doing quite well in California. According to a 2013 report of state auto insurance regulation by the Washington DC-based Consumer Federation of America, California’s auto insurance market is the 3rd most competitive in the nation and auto insurers’ profitability in California is above average. At the same time, California drivers have saved over $100 billion since Prop 103 was passed in 1988. California is the only state in the nation where auto insurance rates have gone down since 1988, by 0.2%, while the average rate increase across the nation was 47%. Although many states require insurance companies to get approval for auto rate changes, California is the only state with a funded public participation process. That is no coincidence.