Geico to cut auto rates for Californians
The Gecko’s got good news for California drivers, at least for those with Geico auto insurance.
The company, known for its smooth-talking reptile TV pitchman, and California Insurance Commissioner Steve Poizner are expected to announce today an almost 11% average rate reduction for all 436,000 Geico General Insurance Co. customers, about one-fourth of them in Southern California.
The estimated $66 million in savings -- about $150 per policyholder -- follows Geico’s move to comply with new state regulations that require rates to be based primarily on a motorist’s driving record, not where he or she lives.
“As a top auto insurer in California, Geico is an excellent example that insurers can serve the best interests of their customers and operate profitably at the same time,” Poizner said in a statement.
Poizner plans to formally announce the reduction this morning in downtown Los Angeles. It would be the first major auto insurance rate cut since he became insurance commissioner in January.
The premium cut by Geico, a unit of Berkshire Hathaway Inc., is the latest of close to 150 rate reductions, totaling about $1 billion, by California-licensed insurance companies in the last year.
Geico, the 16th-largest auto insurer in California and the fourth-largest in the nation, is hoping its lower rates will boost business. “Geico decided to go in and deliver all of the potential savings up front and at once,” said Greg Kalinsky, a regional vice president in Poway.
Poizner said he was pleased that Chevy Chase, Md.-based Geico was now “100% compliant” with the new regulations, a full year ahead of the legal deadline. “Geico’s efforts accurately evaluate customer premiums by fully implementing our auto rating factor regulations,” he said.
The Geico announcement was the first by a major auto insurer since a Sacramento County Superior Court judge on Feb. 15 upheld regulations that were first submitted by former Insurance Commissioner John Garamendi, the current lieutenant governor of California.
Consumer advocates, who have been battling for nearly 20 years to put the new regulations into force, say they are pleased that Poizner is continuing Garamendi’s initiative.
“It shows that he is following through,” said Mark Savage, senior attorney for Consumers Union in San Francisco. “It shows that the parade of ‘horribles’ that insurance companies were complaining about did not come to pass, and, indeed, the consumers of California are saving money.”
The new rules had been the target of a lawsuit by the insurance industry. Insurers contended that the regulations prevented them from using a key measure of risk, the postal ZIP Code where a car is parked.
They warned that a switch, mandated by the rules, to three basic criteria -- a driver’s safety record, number of years behind the wheel, and miles driven annually -- would unfairly raise rates for rural and suburban car owners and lower them disproportionately for urban drivers.
Over the last year, some of the largest auto insurers in the state have lowered their rates substantially.
