Insurers Say Auto Insurance Bill is ‘Good Public Policy’

April 26, 2006

The California Assembly Insurance Committee is considering a bill today that the Association of California Insurance Companies (ACIC) says would prevent the Department of Insurance from altering auto insurance rating factors without first studying the rates and risk of loss.

“This bill is good public policy,” according to ACIC President Sam Sorich. He said the bill would protect consumers against unjustified regulatory action and unfair auto insurance rates.

According to ACIC, AB 2840 would prevent the Department of Insurance from altering auto insurance rating factors without first confirming, through an objective study, that the changes preserve the relationship between rates and the risk of loss. The study also would assure that regulatory changes do not result in arbitrary or unfairly discriminatory rates.

The legislation would directly impact the Department of Insurance’s plans to significantly restrict, through regulations, the use of territory by insurers in setting auto insurance rates.

“The department’s plan would create a major shift in rates paid by California drivers. Studies, including one commissioned by the department, have shown that the proposal would create subsidies among drivers and increase rates for most Californians,” Sorich said.

“The department’s proposal is contrary to a 2000 state court of appeal ruling that concluded rates must be substantially related to risk and they must not be arbitrary or unfairly discriminatory.”

The study called for by AB 2840, according to Sorich, assures drivers that auto rating regulations comply with the law.

Source: ACIC

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