Recent legislative and non-profit actions have 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 any time soon.
Consumer Watchdog, a non-profit public interest organization, stated in a July 28 press release that “Insurance Commissioner Ricardo Lara has rejected the Interinsurance Exchange’s proposed $202 million auto insurance rate increase and the job and training rates should decline. -based discriminatory rating system where working-class Californians pay up to 9% higher premiums.”
The excerpt was also included in a petition filed by Consumer Watchdog with the California Department of Insurance (CDI).
Auto Club’s proposed 6.9% overall rate increase to more than 1 million policies would mean an average annual premium increase of $75 per insured vehicle and $140 per policy, with the worst increase falling among low-income drivers who do not have any of the following: the professions for which Auto Club gives a premium discount according to Consumer Watchdog.
“This economy is already tough — Californians shouldn’t need to add insurance company price gouging to their growing list of financial concerns,” Benjamin Powell, Consumer Watchdog’s human resources attorney, said in the release. “These rebates for high-paying professional jobs leave low-income drivers behind simply because of their job titles.”
Powell added that a 2019 study by Lara found that Auto Club creates “broad socioeconomic inequalities”. The investigation was launched after Consumer Watchdog and 10 community and civil rights organizations filed allegations of illegal and discriminatory carrier pricing practices with the CDI. In December 2019, CDI proposed rules to address this unfair discrimination, but nearly three years later, those rules have not yet been implemented, according to Consumer Watchdog.
According to Consumer Watchdog, occupancy has never been approved by regulation as a lawful assessment factor under Proposition 103 passed by voters. Proposition 103, passed by California voters in November 1988, requires pre-approval by the state’s DOI before carriers can introduce property and casualty insurance said the CDI. The proposal prohibits tariffs that are “excessive, inadequate, unfairly discriminatory” or that violate the tariffs chapter.
When Repairer Driven News asked the CDI for comment on Consumer Watchdog’s press release and petition, they declined to comment directly, saying that Proposition 103 has “saved drivers billions of dollars.”
“Proposition 103 explicitly allowed insurance companies to offer group discounts,” spokesman Gabriel Sanchez wrote. “That includes members of unions, fraternal associations, veterans groups, senior organizations and service organizations who get group discounts.”
RDN also asked when CDI last approved any proposed premium increases.
“The California Department of Insurance has not approved auto insurance rate increases since the pandemic began in March 2020,” Sanchez said. “Instead, Commissioner Lara’s priority is for insurance premiums to accurately reflect consumer driving behavior and risk of harm during the COVID pandemic. By ordering premium returns and sticking to automatic fare increases, his actions have saved drivers $2.4 billion to date. The Department of Insurance is also proposing new regulations that would expand the number of discounts available to working families and protect legitimate group discounts.”
The proposed regulations will ensure that “organized groups such as teachers, firefighters, veterans and seniors can continue to take advantage of these auto insurance discounts,” Sanchez added.
“But the regulations would prohibit auto insurance companies from simply giving discounts based on a person’s education level or occupation — otherwise preventing many Californians from accessing these discounts.”
Consumer Watchdog’s petition also alleges that Auto Club overcharged policyholders during the COVID-19 lockdowns — when claims were low — and may owe hundreds of millions in additional refunds as a result.
With regard to pandemic rates, legislation is planned to be introduced during the veto session in the fall by Senator Jacqueline Collins (D-Chicago) “to give the Illinois Department of Insurance more power over how much insurers can charge,” the president said. Chicago Sun Times.
The Sun-Times reports that Collins’ goal is for the department to be empowered to mandate refunds when premiums are too high and prohibit the use of “discriminatory” non-driving features in setting prices.
“People are already hurting,” Collins told the Sun-Times. “We are a state that requires consumers to purchase insurance.”
She added that she views California’s insurance regulations as a model that Illinois could follow, requiring DOI approval of all proposed rate increases before they can go into effect.
Speaking at the July 21 Collision Industry Conference (CIC) meeting, CSAA Insurance Group APD business consultant Dan Tessadri outlined how carriers develop premium applications and said it could take two years for a premium increase to materialise. However, that is state specific. In Illinois, for example, “auto insurers can set the rates they want and report them to the state after already charging customers more,” according to the Sun-Times.
According to a recent analysis by the Illinois PIRG Education Fund and the Consumer Federation, the four largest carriers in Illinois by market share — State Farm, GEICO, Progressive and Allstate — charged customers $280 million more than they needed to sustain their profitability in 2019 during Preserving the Pandemic of America (CFA). And that was after factoring in the $220 million cumulatively provided by the four insurers in 2020 in customer reimbursements, the organization said.
In March, the Illinois DOI directed auto insurers to release detailed information about the profits they made during the 12 months of the COVID-19 pandemic and said the information would be made available to the public by June 30. The request followed a letter sent by 16 state senators and nine advocacy groups in January urging the department to look into windfall profits from the airlines. Auto insurers have challenged the DOI’s legal authority to require earnings reports.
State Farm opted to raise its auto insurance premiums in Illinois by 3% in May, just two weeks after a 5% increase went into effect, according to Crain’s Chicago Business. The publication reported that filings with the Illinois DOI show that the average premium would increase by $60 per year with the two rate increases.
An analysis by S&P Global Market Intelligence, published in late July, found that State Farm “continued its trend of raising private auto rates by implementing rate hikes in June 17, increasing the group’s total premiums by $377 .8 million” and that GEICO “could see the largest aggregate increase in private auto premiums from rate hikes approved in June.
“GEICO subsidiaries received approval for 27 rate increases in seven states during the month, which could increase the group’s total premiums by $418.7 million,” S&P concluded. “More than half of that increase is expected to come from Virginia, where regulators have approved a total of six increases, two of which are on the list of most impactful changes. Both new rates went into effect on June 16 for new business and have an expected implementation date of August 14 for renewal business.”
By contrast, Progressive’s subsidiaries implemented nine rate cuts in Arkansas, Wisconsin, Iowa and Montana, which S&P said “could reduce the group’s total premiums by $13.3 million.”
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