Major Insurer Aetna Declares Moratorium on New Policies
Aetna Life & Casualty, the ninth-largest seller of property and casualty insurance in California, has declared a moratorium on sales to new customers of all auto, homeowners and commercial liability policies because of uncertainty about how the state will enforce Proposition 103.
“We are not at present writing new policies, at least until a number of issues that were not resolved in last week’s Supreme Court decision are dealt with,” said Aetna spokesman Jason Wright on Wednesday from the company headquarters in Hartford, Conn. He emphasized, however, that existing policies are continuing to be renewed.
Aetna last year sold $103 million of private passenger auto insurance in California, $64 million of homeowners insurance and $451 million of commercial liability insurance, Wright said. On a monthly basis, sales to new customers would represent only a tiny fraction of that total business.
The company’s large health insurance and workmen’s compensation business will not be subject to the moratorium, Wright said.
In San Francisco, a spokeswoman for state Insurance Commissioner Roxani Gillespie said Aetna is the only carrier to have declared such a sales moratorium since the Supreme Court upheld most of Proposition 103 last Thursday. However, the Travelers group of companies announced its own moratorium last November and said last week it would continue it.
The spokeswoman said the department would reserve other comment on the matter until a news conference Gillespie has scheduled for today.
Proposition 103 has a clause requiring insurance companies to sell auto policies to those qualifying for a “good-driver discount,” but that clause does not take effect until Nov. 8.
Wright said Aetna’s managers cannot say how long the halt in sales to new customers may last.
“We’re taking a deep breath, letting the dust settle and trying to get some idea on how the California Insurance Department is going to resolve a bunch of issues,” he said.
“With the new law in effect, you’ve got a whole new regulatory framework, and it’s not set forth as to how it will operate. You can apply for exemptions from the prescribed rollbacks and use the rates you file, subject to their review. But if they disagree with what you’re charging, you have to refund.
“We want to see how that process is going to be run. We’re concerned, however, because at this point, we can’t quantify our risk in selling new policies. We really don’t know what we’re going to be able to charge for them, and whether we will be able to recoup our costs. We’ve got shareholders to consider.”
Wright also noted that the territorial rating system under which many prices have been set differently in various neighborhoods may not be permitted as much in the future, and he said Aetna wants to see what the Insurance Department does about that.
Theresa Whitmarsh, speaking for the Independent Insurance Agents and Brokers of California, said that if moratoriums were to spread, it could destabilize the market and cost insurance agents substantial commissions on new sales.
Meanwhile, the state Insurance Department said Wednesday morning that 58 companies have so far taken at least preliminary steps to apply for exemptions from the 20% rate rollbacks from 1987 levels mandated under Proposition 103.
Some company executives have said they do not feel required to make such applications until the Supreme Court decision formally becomes final on June 3, 30 days after it was rendered.
The insurance industry plaintiffs who unsuccessfully brought suit to have the Supreme Court strike down all of Proposition 103 as unconstitutional have until September to decide whether to appeal the decision to the U.S. Supreme Court. Industry attorney Allen M. Katz, who last week indicated a decision on an appeal would come within days, said this week it may not come for quite awhile yet.
