New state rules on insurance criticized

New rules for setting rates on car, home and other insurance policies in California will result in higher premiums for businesses and individuals, a consumer advocate charged Wednesday.

The regulations adopted Tuesday by the state Department of Insurance “are an outrageous giveaway to the insurance industry,” Harvey Rosenfield, founder of Consumer Watchdog, said in a letter to Insurance Commissioner Steve Poizner.

Rosenfield, author of Proposition 103, the 1988 ballot measure that overhauled California’s insurance regulations, said the rules would weaken the state’s ability to mandate lower rates, such as the 15.9%, $250-million cut Poizner recently ordered in Allstate’s auto insurance premiums.

That charge was denied by Poizner’s office, which said the Republican commissioner has lowered Californians’ insurance premiums by more than $1 billion since taking office in January 2007.

“Mr. Rosenfield is obviously very passionate about this issue,” Deputy Insurance Commissioner Byron Tucker said. “The commissioner shares that passion with him, but in this particular case, Mr. Rosenfield is flat-out wrong.”

The new regulations make changes in the formulas used to set rates for several types of insurance, although not for workers’ compensation or healthcare policies. In particular, the rules give insurers more flexibility in using estimates of future losses when making a case for a rate increase -- a change Rosenfield said would allow insurance companies to “game the regulatory system.”

The rules were adopted on an emergency basis with little opportunity for public comment. They must be approved by the state Office of Administrative Law to go into effect.

The expedited approval process was necessary so that the rules could be in place as auto insurers try to meet a July 14 deadline for drawing up new rate plans, Tucker said. The department has said in the past that the existing rules were confusing insurers.

The insurance industry applauded the changes pertaining to future-loss calculations. However, the industry wants rate requests to be judged on an individual company’s financial situation rather than on statewide industry averages, said Sam Sorich, president of the Assn. of California Insurance Cos.

“The existing regulations are so constraining that they don’t allow an individual company to show its case” for a rate change, Sorich said.

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martin.zimmerman @latimes.com