State May Alter Liability Rates for Insurers

The state Department of Insurance issued a report Monday saying that it is considering a change in the way commercial liability insurance rates are set.

Insurance Commissioner Roxani Gillespie said the formula used by the industry does not seem to take into account the amount of profit individual insurers earn on investments. Insurance companies normally invest a portion of the premiums they collect in such things as stocks, bonds and real estate.

“For some companies, the amount could be significant,” Gillespie said.

Currently, an industry group called the Insurance Service Office recommends that commercial liability rates be based on statistics collected from California insurers. The recommended rates reflect average losses, expenses, inflation and a margin for profit.

Gillespie said the department will hold a hearing June 3 to determine whether it should permit the industry to publish figures that reflect losses only.

Janet Supar, a spokeswoman for the Insurance Information Institute, an industry group, said the industry would have no immediate comment while it reviews the department’s report.

The department’s decision to examine the rate structure is an outgrowth of a year-long study.