Consumer Watchdog – Explorer Insurance Ordered to Reduce Auto Rates by 15% for California Policyholders

Santa Monica, CA -- California drivers with Explorer auto insurance coverage will save $8.3 million per year under an order issued this week by Insurance Commissioner Poizner that requires the company to lower its premiums by 15%. The rate decrease must take effect by December 12, 2008.
 
Explorer had requested a 17.7% increase in the rate hearing. The savings go to over 47,800 Explorer auto insurance customers and will save each policyholder an average $173 per year. The nonprofit Consumer Watchdog intervened in the hearing to represent consumer policyholders and presented the vast majority of evidence in opposition to Explorer’s requested increase.
 
“Consumers can add $8.3 million saved by Explorer auto insurance customers to the string of victories under Proposition 103 that have prevented insurance companies from overcharging California policyholders by more than $1 billion since 2003,” said Consumer Watchdog attorney Todd Foreman. “Explorer, like so many other insurers, tried to circumvent the rules of Proposition 103 with its outrageous rate hike request, but was denied as a result of the tough rules voters enacted almost twenty years ago to the day.”
 
In support of its requested 17.7% increase in the rate hearing, Explorer argued for six exemptions from the regulations implementing Proposition 103’s prohibition on excessive rates and administrative overhead. Consumer Watchdog’s consulting actuary, Allan Schwartz, President of AIS Risk Consultants, Inc., refuted testimony by Explorer’s economist, David Appel of Milliman, Inc., who argued that the company would suffer an unconstitutional confiscation of profits if it were required to follow the same rules imposed on other companies. The claim was rejected by the Commissioner in a decision that upholds a key provision of the rate regulations that allow reasonable, but not excessive, insurer profits and prevent excessive expenses.
 
Prop 103 requires insurance companies to open their books and submit to public hearings to prove their rates are adequate without being excessive. Consumers may intervene in or initiate proceedings to challenge any rate that is unfair or excessive. Explorer’s rates were scrutinized under regulations issued by former Insurance Commissioner John Garamendi in 2006 that revised guidelines for profitability and allowable expenses under the rules of Proposition 103. The same regulations led to two orders earlier this year for Allstate to reduce its auto and homeowners rates by approximately $500 million a year. All challenges to any rate application filed on or after May 16, 2008 will be decided based upon amended regulations issued by Commissioner Poizner earlier this year. Consumer Watchdog is investigating the impact of those regulations on consumer rates.
 
Consumer Watchdog has helped save Californians more than $1 billion by challenging auto, homeowners, and medical malpractice insurance rate proposals since 2003. A full list of previous savings is available by clicking here.
 
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