2 Insurers Seek to Raise Auto Rates

The trend of higher insurance premiums for California drivers continued Monday, with two more large insurers requesting rate increases of at least 5.5%.

Farmers Insurance, which insures 2.2 million vehicles in California, asked the state Department of Insurance for an average 6.6% increase for its drivers while the Automobile Club of Southern California’s insurance arm requested a 5.5% rate hike, according to rate filings that were made public Monday.

The insurers cited higher costs for repairs and medical claims for the increases, which must be approved by regulators before taking effect.

“The number of claims is down, but the severity is up,” said Auto Club spokeswoman Carol Thorp. “Repair costs on [sport-utility vehicles] are 9% more than on cars, and more people are driving SUVs.”

Thorp said the membership club, which insures 1.6 million drivers, had been “reluctant” to raise rates after eight previous premium cuts that shaved 27% off members’ average insurance bills between 1993 and 1999.

Analysts predicted last month that an Allstate bid to increase rates after years of price cutting would trigger other insurers to follow suit. Allstate, which insures 2.2 million autos, asked for a 6.9% premium hike after lowering its rates by 22% from 1996 to 1999.

Rate hike requests of more than 7% typically trigger public hearings; requests of less than 7% are usually approved after an Insurance Department review.

So far, market leader State Farm has refrained from requesting a rate hike. In fact, the company continued lowering its premiums last year even after other insurers were signaling that California’s long-running price war was over.

State Farm is the state’s largest auto insurer with 2.8 million covered vehicles and $1.9 billion in premiums in 1999, the latest year for which insurance department statistics are available.