Alliance of American Insurers has submitted written testimony objecting to proposals by the California Insurance Departments to ban the use of “persistency” as a factor for setting auto insurance rates.
Currently, the state’s Insurance Code states that “the absence of prior auto insurance coverage, in and of itself, shall not be a criterion for determining eligibility for a good driver discount policy, or generally for auto rates, premiums or insurability.” The insurance commissioner is suggesting two alternative interpretations for possible adoption, both of which would prohibit the use of persistency for determining rates for new coverages.
“This does not flow from the statute,” Peter Gorman, vice president of the Alliance’s Western Region, wrote in testimony submitted to the department March 4. “Clearly the drafters of Proposition 103 intended that persistency could not be used as a SOLE determinant, but may be used in combination with other rating factors.”
Gorman went on to oppose a departmental interpretation that would allow the use of persistency only for renewals as “anticompetitive.”
“By prohibiting other competing carriers to apply persistency discounts that could match the policyholder’s current plan, incentives are created to remain with the current carrier. The policyholder would be discouraged from rate shopping and market competition will be severely diminished.”
A public hearing on the department’s proposal, RH-01015532 is being held March 7.
Topics California Auto
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