Insurers say California’s inaction threatens auto policies

By Don Thompson – The Associated Press

Sacramento, California (AP) – Major US insurance companies and associations say California is risking a crisis in the nation’s largest auto insurance market by refusing to agree to any rate increases for more than two years, since the start of the coronavirus pandemic.

Companies have already begun to cut their expenses and say they cannot continue to operate at a loss while insurance commissioner Ricardo Lara is deferring cases brought by companies that represent three-quarters of the California market. Allstate, Geico, Kemper, Liberty Mutual and State Farm all reported paying more claims than they collected in California premiums in the first half of the year, although they It was profitable Late like last year.

It’s part of Lara’s efforts to compensate consumers who he says It was too much During the pandemic’s early months, when traffic nearly disappeared after California first imposed its stay-at-home order. His office couldn’t say how much it believed insurers still owed, but consumer protection group Consumer Watch estimated the amount at more than $3 billion.

People also read…

The data we collected directly from the insurance companies themselves shows many of them Failed to return completely Part of the division’s efforts is to “make it convenient for consumers who continue to charge premiums during the pandemic,” Deputy Insurance Commissioner Michael Soler said.

But last year a government appeals court ruled against Lara can not be imposed Retroactive rates and refunds. The state Supreme Court dismissed the review, and while Lara’s office interprets the ruling narrowly, insurers say it’s a blanket ban on his attempts to claim more refunds.

The controversy comes as Lara is running for re-election against Republican Robert Howell, who is not expected to pose a serious threat to Lara’s re-election.

“The commissioner is an elected official and tries to serve his constituents in a way that does not favor market forces. But if you scrap rates, you are going to have availability issues,” said David Russell, professor of insurance and finance at California State University, Northridge.

It’s similar to the dilemma companies face in securing homes in areas prone to wildfires or along the Florida coast, he said.

“There is a clear and avoidable market crisis looming,” three associations representing insurers that write more than 90% of California auto insurance premiums warned Lara in April.

“Auto insurers cannot operate indefinitely in California without the ability to collect appropriate rates,” the National Association of Mutual Insurers, the California Personal Insurance Federation and the American Property Accident Insurance Association (APCIA) said in their joint letter. “Criticism of decisions made during the pandemic, including claims by some insurance companies that they should have provided more convenience to customers, does not justify ignoring financial realities for the time being.”

Since the easing of pandemic restrictions, traffic has returned to roughly what it was in 2019 before the coronavirus hit, while drivers less safe Even accidents, injuries and the dead said Bob Passmore, APCIA vice president and auto claims expert. death cases fell a little Last spring for the first time in two years, any drop in those payments has been offset by supply chain shortages and rapidly rising inflation.

Harvey Rosenfeld, founder of Consumer Watch, said insurers should pay off their pandemic windfall, but Lara hasn’t proposed the regulations needed to make it do so.

“In fact, it is not clear to us exactly what the commissioner is doing other than … that he does not agree to a rate increase,” Rosenfeld said. “So, while I don’t think any company should get a price increase to pay off what they took illegally from California motorists, it should go through a formal process.”

Thirty-eight files are now being backed up to increase the filing rate, along with five new applications submitted this month.

Since then, Geico in August closed thirty of its brick-and-mortar storefronts in California and stopped letting drivers purchase insurance over the phone, although it still allows online sales.

Tricia Griffiths, progressive president and CEO, said in an earnings call last month that the company was slow growth in California due to the moratorium, while Allstate stopped using independent agents and tried to restrict customers’ payment options until they were blocked by Lara’s office.

“To get them to do things here in California that point back as much as possible is an indication of an unhealthy market, and we think this is directly related to the fact that the insurance commissioner hasn’t reviewed a revised application in 2 half years,” said Denny Ritter, APCIA vice president for government relations. the state.

Insurers said Massachusetts and New York also stopped considering requests for rate increases during the pandemic, but are now starting again.

Joseph Lacher Jr., Kemper’s President, CEO and Chairman of the Board of Directors during the earnings call Last month.

“In the relative short term, my personal belief is that we will start to see markets shrink,” he said. “And I just hope the commissioner doesn’t push it to that point because it’s going to take so long to restart it.”

Rosenfeld doesn’t think the industry is in trouble, but he fears Lara’s inaction will give insurance companies reasons to challenge him in court.

“If there is one tactic the insurance industry has mastered, it is trying to blackmail the public by threatening to withdraw,” he said.

Rosenfeld believes companies are taking advantage of the opportunity to select their best customers to increase profits by making insurance purchases more difficult for high-risk consumers. But he criticized Lara for “kind of precipitating a crisis” by not using his regulatory power to block what he believes is discriminatory behavior of insurance companies.

Insurers combined returned $2.4 billion to California drivers during the pandemic, although Lara calculated that the cuts were far less than what consumers were owed. Soler said the state has 137 licensed insurers that raised more than $17 billion in private auto insurance premiums for passengers in 2020.

“Califorians today have many options for auto insurance in this highly competitive market, and we are going to make sure it continues that way,” Soler said.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.

Leave a Comment