Allstate Insurance auto insurance policyholders could see their yearly premiums cut by an average of $133 a year per vehicle as a result of a ruling
from the state Department of Insurance requiring the company to lower its rates next month.
State Insurance Commissioner Steve Poizner last week approved a recommendation made by an administrative law judge requiring Allstate to lower its rates an average of 15.9 percent to comply with Proposition 103 regulations intended to limit excessive profits made by insurers.
"California’s consumers deserve a competitive marketplace in which to shop around for the best rates that meet their needs," Poizner said in a statement Tuesday announcing the reduction, which amounts to almost $245 million in annual savings.
The decision applies to renewal of existing Allstate policies as well as new policies taken out after April 14.
Allstate, which insures more than 2 million vehicles in California and
is the state’s fifth largest auto insurer, indicated it may appeal the
decision.
"Allstate is willing to take a significant rate
reduction, but believes it should be comparable to other similarly
situated major auto carriers in California," company spokesman Peter
DeMarco said in a statement.
The decision would force the
company to reduce rates significantly more than other insurers even
though Allstate’s rates and loss ratios over the last few years have
been comparable to other insurers, DeMarco said.
The Foundation for Taxpayer and Consumer Rights had sought a rate cut of 19.4 percent.
"Most people will see some relief. We are really pleased with the
overall result. It should help a lot of consumers that are being
overcharged," said Pam Pressley, a foundation attorney who helped argue
for the rate cut at public hearings before the administrative law judge.
The 15.9 percent decrease is expected to result in the average
per-vehicle premium dropping from $834 to $701, or a $133 savings,
based on Foundation calculations derived from data provided by Allstate.
Initially, Allstate requested to have no changes to their rates before
later seeking a 7 percent decrease to comply with rules of Prop. 103,
the insurance reform initiative passed by voters 20 years ago.
Pressley said that Allstate’s argument that it would be hurt
financially if it had to lower rates more than 7 percent was "laughable
if you look at the profits they have been raking in the last few years."
In the last year, other large insurers have voluntarily lowered their rates to meet the Prop. 103 requirements.
In March 2007, State Farm, the largest provider of auto insurance in
California, announced an average rate reduction of 10.1 percent, or $86
per policy, for its 3 million state policyholders. In August, Geico
Insurance announced a 10.8 percent average rate reduction, or $150 per
policy, for its 436,000 state policyholders. AAA reduced rates by an
average of 6.5 percent in December for its nearly one million Northern
California policyholders.
Eve Mitchell covers personal finance. Reach her at 925-952-2690 or [email protected]
