There have been recent legislative and nonprofit actions announced in California and Illinois regarding high auto insurance rates as news of June rate hikes from GEICO and State Farm are just a few that don’t seem to be going away anytime soon. soon.
Consumer Watchdog, a nonprofit public interest organization, stated in a July 28 press release that “Insurance Commissioner Ricardo Lara should reject the Auto Club’s (‘Auto Club’) proposed $202 million increase in auto insurance rate and his work and education. Discriminatory rating system based on which 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).
The Auto Club’s proposed overall increase of 6.9% across 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 on drivers with low incomes that do not have one of the professional occupations for which Auto Club gives a premium discount, according to Consumer Watchdog.
“This economy is tough as it is — Californians shouldn’t have to add price hikes from insurance companies to their growing list of financial worries,” Benjamin Powell, staff attorney at Consumer Watchdog, said in the release. “These deductions for high-paying professional jobs leave low-income drivers stuck in the workforce simply because of their job titles.”
Powell added that a 2019 investigation by Lara found that Auto Club creates “widespread socio-economic inequalities”. The investigation began after Consumer Watchdog and 10 community and civil rights organizations accused CDI of illegal and discriminatory carrier rate-setting practices. In December 2019, CDI proposed regulations to address this unfair discrimination, but, almost three years later, those regulations have not been implemented, according to Consumer Watchdog.
Occupation has never been regulated as a legitimate rating factor under voter-approved Proposition 103, according to Consumer Watchdog. Proposition 103, approved 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 CDI. The proposal prohibits fees that are “excessive, inappropriate, unfairly discriminatory” or that violate the tariffs chapter.
When Repairer Driven News asked CDI for comment on the announcement and Consumer Watchdog’s petition, they did not provide a direct comment, but said that Proposition 103 “has saved drivers billions of dollars.”
“Proposition 103 explicitly allowed insurance companies to offer group discounts,” wrote spokesman Gabriel Sanchez. “This includes members of labor unions, fraternal associations, veterans groups, senior citizen organizations and service organizations that receive group discounts.”
The RDN also asked when the CDI last approved any 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 that insurance premiums during the COVID pandemic accurately reflect consumer driving behavior and risk of loss. By ordering premium returns and holding the line on vehicle toll hikes, his actions have so far saved motorists $2.4 billion. The Insurance Department is also proposing new regulations that would expand the number of deductions available to working families and protect legitimate group deductions.”
The proposed regulations would allow “organized groups like teachers, firefighters, veterans and seniors to continue to benefit from 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 — which prevents many Californians from accessing these discounts.”
The Consumer Watchdog petition also alleges that Auto Club overcharged policyholders during the COVID-19 lockdowns — when accident claims were down — and, as a result, could be owed hundreds of millions in additional refunds.
Regarding the pandemic rates, legislation is scheduled to be introduced during the fall veto session by Sen. Jacqueline Collins (D-Chicago) “to give the Illinois Department of Insurance more power over what insurers can pay,” according to Chicago Sun-Times. .
The Sun-Times reports that Collins’ goal is for the department to have the authority to mandate refunds when premiums are too high and to ban the use of “discriminatory” non-driving features in pricing.
“People are already hurting,” Collins told the Sun-Times. “We are a state that requires consumers to buy insurance.”
She added that she sees California’s insurance regulation as a model that Illinois, which requires DOI approval for all proposed rate increases before they take effect, could follow.
During the Collision Industry Conference (CIC) meeting on July 21, CSAA Insurance Group APD business consultant Dan Tessadri described how carriers develop premium files and said a premium increase can 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 start overcharging customers,” according to the Sun-Times.
The four largest carriers in Illinois by market share — State Farm, GEICO, Progressive and Allstate — charged customers $280 million more than they needed to maintain their 2019 profitability during the pandemic, according to a recent analysis by Illinois PIRG Education Fund and Consumers Federation. of America (CFA). And that was after taking into account the $220 million the four insurers gave cumulatively in customer reimbursements in 2020, the organization said.
In March, the Illinois DOI directed auto insurers to disclose detailed information about the profits they made during the 12-month shutdown 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 organizations in January asking the department to review windfall profits made by carriers. Auto insurers have challenged the DOI’s statutory authority to require earnings disclosure.
State Farm chose to raise 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 that the average premium was set to increase by $60 a year with the two rate hikes.
An analysis by S&P Global Market Intelligence, released in late July, found that State Farm “continued its trend of private vehicle rate increases by delivering 17 rate increases in June, which could increase total group premiums by $377.8 million” and that GEICO “could see the largest total increase in private auto premiums since the rate hike passed in June.”
“GEICO affiliates received regulatory approvals 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 signed off on six total increases, with two of them making 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 overall group premiums by $13.3 million.”
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