Two California Insurers Bow to New Regulations

By William Murphy

Published on September 15, 2006

21st Century's decision to lower auto insurance rates 12 percent for drivers in Los Angeles comes at the end of a nearly 18-year battle by the insurance industry against reforms outlined in Proposition 103, which was passed in 1988. The new regulations follow the initiative's intent by requiring insurance companies to base their rates primarily on a driver's age and safety record, number of years driving experience, and annual mileage.

Until a Superior Court judge ruled last month against an insurance industry attempt to block the new rules, insurance companies used policyholders' zip codes as their primary criteria for determining auto insurance rates.

Safeco plans to drop its rates on homeowners insurance an average of 20 percent for policyholders statewide. The reduction comes after Garamendi ordered insurance companies in June to justify their rates in the face of record low payments on policyholders' claims over two years. A study by the Department of Insurance found that California's four major insurers kept from 59 percent to almost 74 percent of their premiums after payouts.

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