Safeco Agrees to Even Out Its Rate Structure

Safeco, the 12th-biggest auto insurance seller in California, bowed to the state Department of Insurance on Thursday and announced that it will halt a post-election policy of selling to new customers at higher rates than it charges comparable existing customers.

But at the same time, the Seattle-based company, which has a 1.3% share of the California market, said it will reduce the number of its agents allowed to sell new policies by at least half, thus restricting availability in California.

The Department of Insurance accepted the arrangement, although a department lawyer, Reid McClaran, said the company will be monitored to make sure it is applying its cutback of agents on a geographically nondiscriminatory basis.

On Nov. 28, state Insurance Commissioner Roxani Gillespie told both Safeco and State Farm, the largest auto insurance seller in California, to stop selling to new customers at inflated rates or respond within 10 days why they should be permitted to do so.

McClaran said that negotiations with State Farm continue and that the company has asked for a public hearing on the question. State Farm agents contacted Thursday said the company is continuing to sell to new customers at higher rates than it does to old ones.

Safeco and McClaran both said the company has agreed to give either a refund or a credit on future payments to anyone who has been charged inappropriately higher rates since the passage of Proposition 103 in the Nov. 8 election.

Vance Hicken, a Safeco vice president, said new policy sales will be restricted “until such time as we know the outcome (of state Supreme Court court action) on the rollbacks” mandated in Proposition 103.

Hicken said Safeco has been required to accept a large number of assigned-risk customers at artificially low rates and that this has also contributed to its decision to restrict sales in California.

In another development Thursday, a coalition of Latino organizations proposed that the state create a mandatory no-fault auto liability insurance program to meet the needs of millions of low-income drivers who now are uninsured.

The Latino Issues Forum, chaired by former state Supreme Court Justice Cruz Reynoso, said the state-operated program could be financed by increases in the annual motor vehicle registration fees and would save considerable costs by eliminating attorney fees and insurance agent commissions.

The Latino coalition’s proposal would provide basic no-fault liability policies covering up to $30,000 for personal injury and $5,000 for property loss with a $500 deductible. In a no-fault system, accident victims receive payments from their own insurers, regardless of who is to blame.