A Rate Crisis in California — Will Insurers Stay?

It has been two years since California Insurance Commissioner Ricardo Lara has given an auto insurer a rate increase. COVID was the reason Lara froze rates. Though most of us consider COVID much less of a risk these days, Lara has left the COVID rate freeze in place.

To date — and in spite of requests to increase rates — Lara has steadfastly stuck to his no increase stance. He says consumers still need to be compensated for the overcharging done by insurers in the early days of the pandemic.

Insurers say they’ve paid that money back.

The California Department of Insurance Deputy Insurance Commissioner Michael Soller won’t say how much Lara wants given back, but will admit the department believes insurers still owe those consumers a lot more than has been paid.

“Data we collected directly from the insurance companies themselves shows many of them failed to fully return premiums that they overcharged consumers,” Soller said and he says the department wants to “make it right for consumers who continue to have been overcharged on premiums during the pandemic.”

While Soller won’t say how much, Consumer Watchdog will and thinks it is around $3 billion.

These insurers — Liberty Mutual, Allstate, Kemper, GEICO and State Farm — write almost three-quarters of the auto insurance business in California. They’re all now complaining that they are paying more in claims than they are collecting in premiums.

Insurers sued and an appeals court ruled that Lara can’t go back and make rates and rebates retroactive. The California Supreme Court refused to hear Lara’s appeal. However, the commissioner is taking a narrow view of how the appeals court ruled.

Insurers — and California State University, Northridge insurance professor, David Russell — say the commissioner is doing a complete ban on any kind of rate increases.

Period.

“The commissioner is an elected official and he’s trying to serve his constituents in a way that does not favor market forces,” Russell said. “But if you suppress rates, you’re going to get availability problems.”

The National Association of Mutual Insurance Companies (NAMIC), the American Property Casualty Insurance Association (APCIA) and the Personal Insurance Federation of California sent a joint letter to Lara warning him that he’s creating a crisis — and one that is avoidable.

“Auto insurers cannot operate indefinitely in California without the ability to collect adequate rates,” the groups told Lara. “Criticism of decisions made during the pandemic, including allegations by some that insurers should have provided more relief for customers, do not justify ignoring the financial realities of the present.”

Currently the California Department of Insurance is looking at 38 filings by insurers and five of them were filed in September.

Denni Ritter of the APCIA put it in perspective. “To have them doing things here in California that indicates a pulling back as much as they feasibly can, that’s an indication of an unhealthy marketplace, and we think that’s directly tied to the fact that the insurance commissioner has not reviewed a rate filing in two and a half years,” Ritter said.

GEICO closed all of its office in California and no longer lets drivers in California purchase auto insurance by phone. Progressive is slowing its growth in California as well and Allstate has stopped using independent agents and is limiting sales, too.

Source link: Insurance Business America — https://bit.ly/3dPeX88