California Auto Insurance Rates Defy Upward Trend

ByMarcy Gordon

W A S H I N G T O N, June 7, 2001 -- While Californians are getting squeezed by electricity costs, they're getting the best deal in the country on car insurance because of a unique state law, a new study by a consumer group shows.

Auto insurance prices in California declined 4 percent between1989 and 1998 while jumping an average 38.9 percent nationwide,according to a new survey released by Consumer Federationof America.

Insurance premiums have increased the most in Nebraska, South Dakota, WestVirginia, Kentucky and Arkansas, the survey shows. They have increased the least in New Hampshire, Pennsylvania, Massachusetts, Maine and New Jersey.

Tour a Clickable Map for Your State's Rates

Consumers nationwide spend an annual average of more than $700per vehicle and $1,500 per household, totaling $100 billionnationwide, according to Consumer Federation.

California Bucks Trend

California was the only state that showed a decline. At a newsconference, Ralph Nader and other consumer advocates creditedProposition 103, passed by the state's voters in 1988, whichtightened insurance regulation.

"California stands out," said Robert Hunter, director ofinsurance for Consumer Federation, who prepared the study. He saidProp. 103 brought smaller rate increases, fewer uninsured driversand more insurance companies to the state — as well as fatterprofits for the companies.

State insurance regulators around the country "should look toCalifornia for guidance about how to effectively regulate"insurance, said Hunter, a former Texas insurance commissioner.

Prop. 103, among other things, required insurance companies toopen their books to justify rate increases, gave drivers with cleanrecords a 20 percent discount, allowed banks to sell auto insuranceto stimulate competition and required the state commissioner toprovide consumers with rate comparisons.

Insurance Companies Credit Highway Safety

An insurance industry official denounced Prop. 103 as"government price-fixing" and instead attributed the decline inCalifornia's rates to improved highway safety and greater seat beltuse, a crackdown on insurance fraud and legal changes making itmore difficult and expensive to file lawsuits in car accidents.

Insurance premiums around the country have declined since 1998after several years of increases, for those same reasons, DavidSnyder, assistant general counsel of the American InsuranceAssociation, said in a telephone interview.

Hunter said state-by-state figures were not available for yearsafter 1998.

Nader, who led the campaign for Prop. 103, said insurancecompanies' opposition to a similar law for other states is part ofa new push by U.S. industry for deregulation, encouraged by thebusiness-friendly Bush administration.

"Deregulation spells death, disease and injury which could beprevented," he told reporters, citing the deaths the governmenthas linked to Ford Explorers equipped with Firestone tires. Naderhas said weakened regulatory powers of the federal highway safetyagency were a factor in the crashes.

Consumer Federation and other groups, including Consumers Union,the Center for Economic Justice and the Foundation for Taxpayer andConsumer Rights, are asking state insurance commissioners toconsider adopting a California-style law.

Terri Vaughan, vice president of the National Association ofInsurance Commissioners, which represents the state regulators,said the group hadn't studied the new survey yet and had noimmediate comment.

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