Insurance Commissioner Roxani Gillespie has approved requests for rate increases by 46 auto insurers, the first markups she has granted in more than a year, it was announced Monday. In addition, it was disclosed that “a few” more companies will get hikes before Gillespie leaves office Jan. 7.
All 46 of the companies were authorized to increase the liability portions of policies, usually covering about 60% of the bill, but these were diminished either by smaller increases or actual decreases in the physical damage portions of the policies, according to Milo W. Pearson, chief of the Insurance Department’s Rate Regulation Division.
Pearson said the net increases are averages and will vary widely from customer to customer. When all increases contemplated by Jan. 7 are taken into account, companies doing almost one-third of the state’s auto insurance business will be charging more.
The raises will go into effect immediately, although since companies bill 30 days in advance, customers will not begin paying the new rates until late January at the earliest. Since most companies stagger charges over three or six-month billing cycles, it will be some time before a majority of policyholders get the increases.
The actions, which formally lift the freeze on auto insurance price increases Gillespie imposed in October, 1989, come at a time when the commissioner is out of the state, visiting her ailing mother in Greece.
Between the time Proposition 103, the landmark insurance reform initiative, was passed in November, 1988, and the declaration of the freeze, 11 months later, many companies were allowed to raise their rates at will.
Of the three biggest sellers on the commissioner’s new list of increases, Allstate, which has about a 10% share of the total California market, was given a 7.6% liability premium increase and a 1.8% physical damage increase. The next-largest, Mercury Casualty, received a liability increase of 10% and a physical damage increase of 0.7%, while California Casualty was granted an across-the-board 14.8% increase.
A few smaller companies received liability increases in the 37% to 50% range, and sizable physical damage decreases.
For instance, Electric Insurance Co. received a 52.6% liability increase and a 28.7% physical damage decrease, National Fire of Hartford a 41.8% increase in liability and a 13.1% decrease in physical damage, and Pennsylvania General a 37.2% increase in liability and a 25.8% decrease in physical damage.
Liability claims against insurers have been moving steadily upward in California, particularly for personal injuries, while there has often been a decline in auto damage claims because of fewer accidents and more accident-resistant equipment, such as safety bumpers.
All figures provided represent averages. A given customer, depending mainly on his or her driving record, might get either a substantially larger or smaller net increase than the figure authorized for the company, and conceivably might even get a decrease from a company authorized to raise its average rates just a little.
Gillespie has separately given many companies authority to shuffle their rates, giving “good” drivers with one or fewer minor citations and no at-fault accidents in the last three years lower rates, while raising “bad” drivers up to 40%, so this change too will be figured into individual billings.
Because most companies have many more “good” drivers covered than “bad” ones, the increases are likely to hit the bad drivers disproportionately hard.
Beyond Monday’s announcements, Pearson said Gillespie is likely to approve a Farmers group request for a 9% liability increase and a 1.9% physical damage increase before leaving office, but that a USAA request for an across-the-board 6.6% increase will not be acted upon before John Garamendi assumes the commissioner’s post next month.
Garamendi, a Democrat, will be the state’s first elected commissioner. He assailed Gillespie, a Republican appointee of Gov. George Deukmejian, when she disclosed two weeks ago that she intended to lift the freeze and grant rate increases, charging that she planned to give the companies “a Christmas bonus.”
At the time, Garamendi did not know that the specific increases would actually be made public on Christmas eve. The commissioner-elect was unavailable for comment on Monday’s announcements.
Pearson said that two of the state’s biggest sellers of auto insurance, State Farm and the Automobile Club of Southern California, have not filed for any general rate increases. State Farm, however, recently secured authorization from Gillespie to shuffle its rates, charging its “bad” drivers--about 10% of its customers--much more and many of its “good” drivers a little less.
Under Proposition 103, company rate-increase requests must receive the approval of the commissioner.
The commissioner is required to hold a public hearing for any increase of more than 7.5% in personal lines, or 15% in commercial lines, if it is requested by any consumer group or other party. But Pearson said that in the 46 company increases announced Monday, no such requests were made.
In other developments in California insurance, it was disclosed that Deukmejian’s press secretary, Robert Gore, will become chief spokesman for the state’s major insurance lobby, the Assn. of California Insurance Companies, when Deukmejian leaves office. John H. Sullivan, undersecretary of the state Business, Transportation and Housing Agency, who has handled many insurance matters for the Deukmejian Administration, will become new president of the Assn. for California Tort Reform, a group closely aligned with the industry.
Gillespie promised earlier in the year not to return to an industry job when she leaves the commissioner’s office. Deukmejian has indicated he is considering naming her to a Los Angeles Superior Court judgeship, and has sent her name to a review panel of the State Bar of California for its recommendation on her qualifications
AUTO INSURANCE RATE INCREASES
This is a list of rate changes approved by outgoing Insurance Commissioner Roxani Gillespie for 46 auto insurance companies that requested them. All figures are expressed as the average percentage of rise or fall in semiannual premiums, and individual policyholder changes may differ. Changes for both liability and physical damage components of company policies are given. These were company names as listed by the state Insurance Department. In some cases names can be misleading. For instance, Auto Insurance of Hartford is actually an Aetna subsidiary, not part of the main Hartford company.
PHYSICAL LIABILITY DAMAGE COMPANY % CHANGE % CHANGE Allstate Prop. & Casualty +7.6 +1.8 Allstate Insur. +7.6 +1.8 Ame Casualty of Reading +41.8 -13.1 American & Foreign +29.7 -6.1 Auto Insur. of Hartford +38.0 -15.0 Cal Farm Insur. Co. +7.4 +4.6 Cal-American Insur. +22.5 +15.3 California Capital +6.9 n/a Calif. Casuality Indemn. Ex. +14.78 n/a Calif. Casualty Insur. Co. +14.78 n/a Calif. Casualty & Fire Insur. +14.78 n/a Calif. Casualty Gen. Insur. +14.78 n/a Civil Service Employees +6.8 +6.3 CNA Casualty of Calif. +41.8 -13.1 Coast Nat. Insur. +6.56 +20.54 Continental Casualty +41.8 -13.1 CSE Safeguard Ins. Co. +6.8 +6.3 Depositors Insur. +20.3 -5.9 Eagle West Insur. Co. +6.9 n/a Electric Insur. Co. +52.6 -28.7 Five Star Insur. Co +41.0 n/a General Accident Insur. +28.9 -16.8 Globe Indemnity +29.7 -6.1 Mercury Casualty +10.0 +0.7 Mercury Insur. +10.0 n/a National Fire of Hartford +41.8 -13.1 Nationwide Mutual Fire +12.6 -22.36 Nationwide Mutual +12.6 -22.36 Nationwide Prop. & Casualty +12.6 -22.36 Newark Insur. Co. +29.7 -6.1 Northbrook Prop. & Casualty +7.6 +1.8 Northbrook Indemnity +7.6 +1.8 Northbrook National +7.6 +1.8 Pennsylvania General +37.2 -25.8 Prudential Prop. & Casualty Insur. +6.9 +6.7 Prudential Gen. Insur. +6.9 +6.7 Royal Indemnity +29.7 -6.1 Royal of America +29.7 -6.1 Safeguard Insur. Co. +29.7 -6.1 Transcontinental Insur. +41.8 -13.1 Transportation Insur. +41.8 -13.1 Universal Underwriters +21.4 +15.0 Valley Forge Insur. Co. +41.8 -13.1 Workmen’s Auto Insur. +25.2 +10.5 Worldwide U/W Insur. +16.0 -21.8 Zurich Insurance Co. +3.4 n/a
Source: California Department of Insurance
Compiled by Times editorial researcher Michael Meyers