As Auto Insurance Rates Rise, Legislative and Nonprofit Actions Are Popping Up

Recent legislative and nonprofit action has been announced in California and Illinois regarding high auto insurance rates, as news of June rate increases by GEICO and State Farm are just a few of many that don’t seem to be going away anytime soon.

Consumer Watchdog, a nonprofit public interest organization, said in a July 28 press release that “Insurance Commissioner Ricardo Lara should reject the proposed Automobile Club (“Auto Club”) inter-insurance exchange. a $202 million auto insurance rate hike and its labor and education based on a discriminatory pricing system under which working-class Californians pay premiums up to 9% higher.

The excerpt was also included in a petition filed by Consumer Watchdog with the California Department of Insurance (CDI).

The 6.9% overall rate increase proposed by the Auto Club to more than one million policies would mean an average annual premium increase of $75 per insured vehicle and $140 per policy, the worst of the increase going to low-income drivers who do not have one of the professional occupations for which Auto Club provides a premium discount, according to Consumer Watchdog.

“This economy is tough because Californians shouldn’t have to add price gouging by insurance companies to their growing list of financial problems,” Consumer Watchdog staff attorney Benjamin Powell said in the statement. “These discounts for high-paying professional jobs allow low-income drivers to pick up the slack, simply because of their job titles.”

Powell added that a 2019 survey by Lara found the Auto Club creates “great socio-economic disparities.” The investigation was launched after Consumer Watchdog and 10 community and civil rights organizations brought allegations of illegal and discriminatory carrier pricing practices to CDI. In December 2019, the CDI proposed regulations to address this unfair discrimination but, nearly three years later, those rules have not been implemented, according to Consumer Watchdog.

Occupancy was never approved by regulation as a legal scoring factor under Proposition 103 passed by voters, according to Consumer Watchdog. Proposition 103, passed by California voters in November 1988, requires prior approval from the state’s DOI before carriers can apply property and casualty insurance rates, according to the CDI. The proposal prohibits tariffs that are “excessive, inappropriate, unfairly discriminatory” or that violate the tariffs chapter.

When Repairer Driven News asked CDI to comment on the Consumer Watchdog press release and petition, they did not provide a direct comment, but said Proposition 103 had “saved drivers billions of dollars.”

“Proposition 103 explicitly allowed insurance companies to offer group discounts,” spokesman Gabriel Sanchez wrote. “This includes members of unions, fraternal associations, veterans groups, seniors organizations and service organizations who receive group discounts.”

RDN also asked when CDI last approved the proposed premium rate increases.

“The California Department of Insurance has not approved any auto insurance rate increases since the pandemic began in March 2020,” Sanchez said. “Instead, Commissioner Lara’s priority is for insurance premiums during the COVID pandemic to accurately reflect consumer driving behavior and risk of loss. By ordering premium refunds and holding the line on auto rate increases, his actions so far have saved drivers $2.4 billion. The Department of Insurance is also proposing new regulations that would increase the number of discounts available to working families and protect legitimate group discounts.

The proposed settlement will allow “organized groups such as teachers, firefighters, veterans and seniors to continue to receive these auto insurance discounts,” Sanchez added.

“But the regulations would prohibit car insurance companies from simply giving discounts based on a person’s level of education or occupation — which prevents many Californians from otherwise accessing those discounts.”

The Consumer Watchdog petition also alleges that the Auto Club overcharged policyholders during the COVID-19 shutdowns — when accident claims were down — and, as a result, may owe hundreds of millions more in reimbursements.

Regarding pandemic rates, legislation is expected to be introduced in the fall veto session by Sen. Jacqueline Collins (D-Chicago) “to give the Illinois Department of Insurance more power over the amount that insurers can charge,” according to the Chicago Sun-Times.

The Sun-Times reports that Collins’ goal is for the department to have the power to impose refunds when premiums are too high and to prohibit the use of “discriminatory” non-driving features in setting premiums. price.

“People are already hurting,” Collins told the Sun-Times. “We are a state that requires consumers to purchase insurance.”

She added that she sees California’s insurance regulations as a model that Illinois could follow, which requires DOI approval of all proposed rate increases before they can go into effect.

At the July 21 meeting of the Collision Industry Conference (CIC), CSAA Insurance Group APD business consultant Dan Tessadri explained how carriers develop premium statements and said a premium increase could take two years to materialize. However, this is state specific. For example, in Illinois, “auto insurers can set whatever rates they want and report them to the state after they’ve already started charging customers more,” according to the Sun-Times.

Illinois’ four largest carriers by market share — State Farm, GEICO, Progressive and Allstate — charged customers $280 million more than needed to maintain profitability in 2019 during the pandemic, analysis shows from the Illinois PIRG Education Fund and the Consumer Federation of America (CFA). And that was after taking into account the $220 million the four insurers cumulatively provided in reimbursements to customers in 2020, the organization said.

In March, the Illinois DOI ordered auto insurers to release detailed information about the profits they made during the 12 months of shutdown due to the COVID-19 pandemic and said the information would be made available. available to the public by June 30. The request followed a letter sent by 16 state senators and nine advocacy organizations in January urging the department to look into windfall profits made by carriers. Auto insurers challenged the DOI’s legal authority to require earnings disclosure.

State Farm chose to raise its Illinois auto insurance premiums by 3% in May, just two weeks after a 5% increase took effect, according to Crain’s Chicago Business. The publication reported that filings with the Illinois DOI show the average premium is expected to increase by $60 per year with the two rate increases.

An analysis by S&P Global Market Intelligence, released in late July, found that State Farm “continued its trend of increasing private car rates by securing 17 rate increases in June, which could increase the group’s total premiums by 377.8 million” and that GEICO “could see the largest overall increase in private auto premiums from the rate hikes approved in June.

“GEICO subsidiaries received regulatory approvals for 27 rate hikes in seven states during the month, which could increase total group premiums by $418.7 million,” S&P concluded. “More than half of this increase is expected to come from Virginia, where regulators have approved six total increases, two of which are on the list of most impactful changes. The two new rates went into effect on June 16 for new business and have an expected implementation date of August 14 for renewal business.

In contrast, Progressive affiliates implemented nine rate cuts in Arkansas, Wisconsin, Iowa and Montana, which S&P says “could reduce the group’s overall premiums by $13.3 million. dollars”.


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