State Agency Touts Drop in Auto Insurance Rates

Defending its record of protecting consumers, the state Department of Insurance on Wednesday announced that auto insurance rates of the 10 largest carriers dropped last year by $378 million and are expected to drop an additional $266 million this year.

Department officials attributed the drop in rates, in part, to an increasingly competitive insurance market, a reduction in accident claims and rate cuts mandated under voter-approved initiatives.

“Not only are we seeing a decline in auto insurance rates, but the new auto rate regulations ordered by this administration have resulted in dramatic benefits to consumers,” Chief Deputy Commissioner Ken Gibson told a joint legislative oversight committee examining the department’s operations.

The sometimes heated hearing was conducted by the Senate and Assembly insurance committees and was intended to be a review of Insurance Commissioner Chuck Quackenbush’s performance halfway through his four-year term. Quackenbush, elected to the post in 1994, could not attend because he was at the Ohio bedside of his sick father.

But in a letter to the Senate committee, Quackenbush said, “Californians are seeing an average rate reduction of 5% with even larger reductions in urban areas.”

Much of the focus of Wednesday’s proceedings was an audit report issued last week by state Auditor Kurt Sjoberg. The audit criticized the way Quackenbush has managed the department, concluding that there were significant problems in fiscal operations and weaknesses in the way some consumer programs are administered.

Consumer groups, while not disputing the figures presented by Quackenbush’s staff, said outside the hearing that the auto rate cuts are relatively low and that the fees could have been trimmed much more steeply.

“Quackenbush hasn’t brought down the rates . . . he’s allowed excessive profits” for insurance companies, said Harry Snyder, senior advocate for Consumers Union. In June, the group issued a report that claimed that auto insurers overcharged Californians by more than $800 million in 1995.

In the past eight months, Snyder estimated that California drivers have been overcharged by $400 million to $500 million.

At the hearing, Consumers Union gave Quackenbush a C-minus grade, saying his agency has tilted against consumer protection and has failed to set standards for excessive rates.

Gibson, sitting in for Quackenbush, stressed the department’s aggressive protection of people who buy all types of insurance.

He said that over the past two years, fines totaling $10.8 million have been levied against insurance companies, compared to $6.6 million in fines for the entire four years of Quackenbush’s predecessor, John Garamendi.

Citing the state auditor’s report, Assemblywoman Liz Figueroa (D-Fremont), chairwoman of the Assembly Insurance Committee, voiced reservations about the way Quackenbush is running his agency.

“I am concerned that there is a growing perception that a department which cannot manage its own books will not be able to help solve anyone else’s problems,” Figueroa said.

“I agree with Commissioner Quackenbush’s commitment to making the department as efficient and cost-effective as possible, but I am afraid that recent layoffs and cutbacks are not making the department more efficient, they are just making it smaller.”

The Personal Insurance Federation of California, which represents many of largest insurance carriers in the state, took exception to critics who said the department is not acting as a consumer watchdog.

“We cannot sneeze without regulatory approval from the California Department of Insurance,” said Dan Dunmoyer, president of the federation, in testimony prepared for the hearing.