Groups Target Auto Insurers for U.S. Revolt

Four days after the California Supreme Court upheld most of the features of Proposition 103 to cut insurance rates, five major consumer groups proposed a banner program for a nationwide consumer revolt against the auto-insurance industry.

“A consumer rebellion is under way against discriminatory insurance industry policies and waste,” consumer advocate Ralph Nader said at a press conference to present a program of reforms for the industry.

In an unprecedent show of unity on auto-insurance issues, the report was prepared by Consumer Federation of America, the National Insurance Consumer Organization, Consumers Union, Public Citizen and the U.S. Public Research Group. The program incorporates many features of Proposition 103.

Last year, California voters approved Proposition 103, which included such far-reaching reforms of the auto-insurance industry as a rate rollback, rate regulation and elimination of the state’s antitrust exemption. The state Supreme Court upheld most features of the proposition Thursday.

Washington Lobbying

“In coming months, we will use the report to support our advocacy in Washington and throughout the states,” said Stephen Brobeck, executive director for Consumer Federation of America.

The insurance industry received the consumer groups’ report with disappointment.

“We have promoted automobile safety, the competitive replacement of parts, no-fault insurance, and presented recently a 14-point plan” to reduce industry costs and rates, Susan Miura, spokeswoman for the Alliance of American Insurers, said in a telephone interview. “Yet we are not given any credit.”

The consumer groups said their program could reduce auto insurance premiums by $15 billion to $23 billion, about 19% to 30% of insurer spending, or an average of $181 to $277 per insured household.

The most significant reforms recommended by the report would reduce insurer “waste and inefficiency caused by insufficient competition and the industry’s cost pass-through method of rate-making, under which profits rise with costs.”