Pa. Expects $120M in Car Insurance Rate Cuts

January 21, 2005

Pennsylvania Gov. Ed Rendell said that findings from an auto insurance study would be used to cut premiums by at least $120 million over the next several months.

Insurance Commissioner Diane Koken and her department will use the findings on tort selections and urban and rural area driving experience, to “hold the line on insurance rates,” according to Rendell.

Pennsylvania law gives drivers the choice of full or limited tort on their auto insurance policies. Limited tort offers a savings on auto insurance premiums. Consumers who select limited tort are still able to recover all out-of-pocket medical and other expenses, but not certain damages such as payments for pain and suffering unless their injuries are defined as serious. Full tort coverage, which is more expensive, allows for unrestricted rights to bring suit against the negligent party.

In its analysis, the department said that it further confirmed its earlier position, now with the benefit of a greater volume of data, that a 40 percent tort differential between full and limited tort electors was appropriate on a coverage-by-coverage basis for bodily injury, first party benefits, and uninsured/underinsured motorist.

According to the department, examples of some of the $120 million in savings include:

• Effective Sept. 7, 2004, Progressive Northern and Progressive Casualty Insurance Companies reduced rates for their Philadelphia territories (relatively and in total) by approximately $1.5 million.

• Effective Jan. 7, 2005, Allstate Insurance Company filed to reduce rates for their Philadelphia territories relatively by approximately $4.2 million.

• Effective Feb. 1, 2005, State Farm Mutual Auto Insurance and State Farm Fire and Casualty Companies filed to reduce rates by approximately $83 million on a statewide basis in total, including $11 million for their Philadelphia territories. (These changes include relative savings for their Philadelphia territories of approximately $3.4 million.)

• Effective April 1, 2005, Erie Insurance Exchange and Erie Insurance Company filed to reduce rates by approximately $30.9 million on a statewide basis in total, including $1.4 million for Philadelphia territories. (These changes include relative savings for their Philadelphia territories of approximately $0.8 million.)

Rendell made his announcement the same day he appointed Cindy Fillman as the first consumer liaison for the insurance department.

The executive summary of the Insurance Department’s auto insurance data call can be found at www.insurance.state.pa.us.