Two more insurers will offer rate cuts
By Jennifer Davies
UNION-TRIBUNE STAFF WRITER
September 15, 2006
Add 21st Century and Safeco to the growing list of insurance companies that are reducing their rates for California consumers.
Yesterday, 21st Century said it would reduce rates for drivers across
the state by 5 percent on average. The company has about 740,000 policy
holders and estimated that the rate reductions would amount to savings
of more than $60 million.
Safeco, which has about 189,000 customers statewide, said it
was reducing its homeowner insurance rates by an average of 20 percent
statewide.
In San Diego County, the rate decreases would be between 5
percent and 10 percent.
In the past few weeks, four other insurers, including the Auto
Club of Southern California, State Farm and USAA, have moved to cut
their rates for auto or homeowner insurance, and in some cases both.
The rate reductions are the result of two initiatives by Insurance Commissioner John Garamendi.
Car insurance rates are being driven down by a change in policy
on how rates are now calculated. Until a recent court ruling, companies
set auto insurance rates based primarily on the ZIP code in which the
driver lived.
That was in direct conflict with Proposition 103, which was
passed in 1988 and stated that rates should be determined based on
driving record, miles driven and experience.
The insurance industry fought the legislation for close to 18
years. Last month, a Sacramento Superior Court judge upheld new
regulations written by Garamendi aimed at finally implementing the
intent of Proposition 103.
Richard Holober, executive director of the Consumer Federation of California, said the rate reductions were a long time coming.
"The industry has finally come to the recognition that this is the law," he said. "They’ve given up the fight."
With names such as State Farm lowering rates, other insurance providers must follow suit.
"To the extent that there is competition, it puts pressure on the other companies," Holober said.Homeowner’s insurance also has come down since Garamendi has
ordered companies to explain their rates, as payouts for losses have
been at historic lows for two years.
According to a Department of Insurance report, State Farm kept
62.4 percent of its premiums after its claim payments last year while
Safeco kept 73.7 percent. Allstate kept 59 percent of its premiums
after payouts, and Farmers kept 62.3 percent.