Consumer Federation of California

Insurers create phony “groups” to favor wealthy motorists with lower rates.

Consumer, senior, civil rights and community advocates are supporting a proposed California Department of Insurance regulation that would curb an industry abuse of automobile insurance rate fairness.

The coalition sent a letter to the Assembly Insurance Committee in advance of a March 11, 2020 hearing on the proposed regulation.

Insurers have unilaterally created phony “group” discounts for cherry-picked upper income consumers, such as “executives” and “CEOs”, abusing a provision of voter-enacted Proposition 103 that is designed to allow legitimate membership organizations to negotiate discounts for their members. Insurers offset discounts for their counterfeit groups of professionals and wealthy Californians by jacking up the rates charged to low and moderate income policyholders who have identical accident risk factors.

The proposed regulation would allow real membership organizations, such as labor unions, senior citizen groups and fraternal clubs to negotiate auto insurance discounts for their members, while stopping insurers from creating fictitious “groups” with no real existence except as an excuse to favor upper income motorists. Eliminating this abuse would restore the principle that rates should be based on a driver’s accident risk, and not on job title or educational attainment. Premium rates for low and moderate income consumers with good driving records would benefit from reduced premium rates.

The American Property Casualty Insurance Association is leading the charge to derail the proposed insurance regulation.  This industry trade association is so well versed in its use of fake groups that it is now masquerading under the front group “Californians United to Protect Insurance Discounts” (for the rich).  CFC and our allies are fighting back in support of the Insurance Commissioner’s proposed fairness regulation.