Calif. insurance commissioner accuses companies of price gouging

By William Murphy

Published on May 26, 2006

Garamendi said that in recent years California's top insurers have taken in inordinate premium payments in relation to payments on claims. A recent Insurance Department study showed that in 2004 California's top five insurance companies paid approximately $1 billion in claims on $3 billion in premiums.

The insurers say they need to build large reserves in order to be able to handle large-scale disasters, such as earthquakes and wildfires.

Garamendi's accusations come on the heels of the May 18 launch of a media campaign by major California insurers to discredit Garamendi's proposed "Good Driver" pricing reforms aimed at curbing the insurers' use of ZIP codes to set premium rates, usually higher in more-affluent areas.

Garamendi, who is running for lieutenant governor, said that the insurers offered on April 24 to shelve their campaign if he would drop or postpone the reforms. Garamendi said the timing and nature of the insurance companies’ proposal constituted “political blackmail and extortion." He asked the State Attorney General, the U.S. Attorney’s Office, and the FBI to look into the matter.

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