Quackenbush’s Exit May Delay Insurance Hikes

Insurers could have a tougher time getting rate increases approved in the wake of state Insurance Commissioner Chuck Quackenbush’s resignation.

Insurance industry analysts say many companies want to raise auto premiums in particular, believing rates were cut too deeply during price wars in the late-1990s.

But a still-competitive environment and the political turmoil surrounding the Quackenbush affair have discouraged insurers from applying for rate increases, said Ira Zuckerman, industry analyst with Westport, Conn.-based Nutmeg Securities Ltd.

“It would probably be tougher to get rate increases through under a Democrat, but there probably is not going to be a great deal of rate activity anyway” in the near term, Zuckerman said.

California drivers benefited as insurers slashed auto premiums in the late ‘90s. That all but ended last year, as insurers worried about the possible effect of legislation aimed at restoring a victim’s ability to sue another person’s insurance firm for failing to settle a claim.

By the time voters rejected that threat (Propositions 30 and 31), insurers argued that rising claims costs would justify a new round of premium hikes.

But insurers were reluctant to seek rate hikes as the Quackenbush scandal widened in recent months, for fear of becoming a lightning rod of public disapproval, experts said. Also, State Farm Insurance Cos. added to competitive pressures by recently requesting a 5% discount on its California rates.

Even so, many insurance firms say they will need to raise auto rates before too long due to higher costs.

Despite the widespread perception that Quackenbush was the insurance industry’s friend, few insurers lamented his resignation.

He came under fire for allegedly cutting sweetheart deals with insurers over Northridge quake claims, but he was not well regarded by most insurance firms, who believed he was too willing to sacrifice public policy for political ends, said Brian Sullivan, a Laguna Niguel-based industry analyst and editor of Risk Information, which covers national property and casualty insurers.

The industry hopes Quackenbush’s replacement “can restore the credibility of the department with the public and with the industry it regulates,” said Candysse Miller, regional director of the Insurance Information Network of California, a trade group, and a former spokeswoman for the state Department of Insurance under Quackenbush’s predecessor, John Garamendi.

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