State Farm Is Planning Steep Rate Cuts for Good Drivers
State Farm Insurance--California’s largest auto insurer--has proposed significant rate cuts for good drivers in major urban areas, with premiums for the company’s central Los Angeles drivers expected to drop nearly 17%, state insurance regulators said Wednesday.
Insurance Commissioner Chuck Quackenbush said he expects similar reductions from other insurers as his staff reviews a slew of new rate proposals submitted last month. Those rates were, for the first time, to fully comply with Proposition 103, the nearly 9-year-old insurance reform initiative.
For the record:
12:00 a.m. March 7, 1997 For the Record
Los Angeles Times Friday March 7, 1997 Home Edition Business Part D Page 3 Financial Desk 2 inches; 42 words Type of Material: Correction
Insurance commissioner--California Insurance Commissioner Chuck Quackenbush is a former state assemblyman and co-founder of a firm that supplied temporary workers to the electronics industry. A story in Thursday’s Business section erroneously described his former work in private industry.
“It’s the latest [step] in prices coming down in California,” Quackenbush said at a Los Angeles news conference.
However, Quackenbush’s expectation of a series of substantial rate cuts was disputed by other insurance companies, which said their prices would not fall as steeply as those of State Farm. In addition, consumer advocates held Quackenbush, a former insurance industry executive, responsible for missing rate proposals from more than 100 insurance companies they say have yet to file.
“He’s not forcing the companies” to file the new rates, said Harvey Rosenfield, author of Proposition 103.
Quackenbush could not be reached for a response.
The new rates filed last month are based primarily on Proposition 103’s requirement that motorists’ driving records, not their ZIP Code, be the basis of how much they pay for auto insurance. The new rates also are supposed to reflect last year’s passage of Proposition 213, which limited the ability of uninsured motorists to sue for pain and suffering, even if they are not to blame for an accident. The proposition is expected to reduce claims, and thus insurance companies’ costs, related to uninsured motorists.
Good drivers in inner-city areas were expected to be the chief beneficiaries under both propositions. State Farm customers in San Bernardino, for example, would see their rates fall an average of 3.7%--a fraction of the 17% drop for central Los Angeles drivers and the 10.2% decline proposed for those in the San Fernando Valley.
State Farm has proposed rate cuts on average of 8.4% in Los Angeles County; 8% in Orange County; and 5.1% in San Bernardino County. Statewide, the company would cut rates on average by 5.3%. Those with poor driving records will probably see their rates rise.
State Farm’s rates are expected to be approved by state regulators and will go into effect as policies come up for renewal.
The new rates proposed by other insurers might not offer savings as dramatic as those proposed by State Farm, which claims about 20% of the California auto insurance market.
The Automobile Club of Southern California said it would cut rates on average statewide by 2.4% and by about 10% in Central Los Angeles, Inglewood and Gardena. Although smaller than State Farm’s proposed cuts, auto club spokeswoman Layna Browdy said the insurer has reduced rates on average by about 19% over the past four years.
Farmers, which has proposed a statewide average reduction of 1.6%, said its rate cut would be spread more evenly among urban and suburban customers.
