Aetna Calls Halt to New Policies in California

Connecticut-based Aetna Life and Casualty today imposed a moratorium on the writing of new property and casualty insurance policies in California.

Aetna thus becomes the first insurance company to limit its business in the state after last week’s state Supreme Court decision that upheld most of Proposition 103.

The moratorium affects new policies for auto, homeowners’ and commercial liability insurance, which are all covered by Proposition 103. The company will continue to renew the policies of existing customers.

Aetna, the ninth-largest property and casualty insurer in California, revealed the moratorium in a letter dated Monday.

The moratorium does not apply to worker’s compensation and life insurance, which are not affected by Proposition 103.

From Aetna’s headquarters in Hartford, Conn., spokesman Jason Wright said the moratorium will remain in effect “at least until some of the issues that weren’t resolved by the court are resolved by the (state) Insurance Department.”

Although Aetna is not a big force in auto insurance in the state, it is a major source of commercial liability insurance, something that businesses need.

Heavy Impact Seen

Teresa Whitmeyer of the Independent Insurance Agents and Brokers of California said Aetna’s action could “kill a lot of agents, especially those in rural areas, if other companies do the same thing. We are very, very concerned.”

The Supreme Court last week ruled that the 20% rate cutback mandated by Proposition 103 is constitutional but only if it allows insurance companies to earn a “fair return.”

Insurance Commissioner Roxani Gillespie was left with sweeping authority, including the power to impose or deny the rate cut.

Wright said that because of the uncertainty over what rates are allowed and which factors can be considered when pricing auto insurance, Aetna “cannot quantify what risks it is assuming.”