Consumer advocates have filed a challenge to block a proposed 25 percent increase in Fireman’s Fund’s earthquake insurance rates in a move that they say could save each of the company’s earthquake customers $356 a year.
The nonprofit Foundation for Taxpayer and Consumer Rights (FTCR) also demanded the company decrease its homeowners insurance premiums by at least 30 percent, more than double the company’s proposed reductions of 7 percent to 14 percent. The homeowners premium challenge could save Fireman’s Fund policyholders another $27 million, or approximately $437 per customer, the group said.
“A consumer whose earthquake and homeowners insurance are with Fireman’s Fund will pay almost $800 a year too much if the company’s rate plans are approved,” said Carmen Balber, consumer advocate with FTCR. “An unwarranted earthquake insurance rate hike will only have the effect of leaving more Californians uninsured when the big one comes.”
The challenges are being brought under the rules of voter-approved Proposition 103, which requires insurance companies to justify rate changes prior to imposing increases, and allows consumer groups to challenge excessive rates and request public hearings. The Insurance Commissioner must grant a hearing if a requested rate change exceeds 7 percent.
FTCR said its experts determined that Fireman’s Fund’s rate plans fail to meet several rules meant to keep insurance prices fair and appropriate in California. According to FTCR’s formal challenge, the insurer’s requested earthquake rate hike is excessive, includes unjustifiable profit margins and does not use a credible model to determine risk. A substantial decrease in Fireman’s homeowners rates is called for, according to that challenge, because the company does not provide the data necessary to justify its filed rates, uses the wrong time frames to present an inadequate picture of risk, and would pass on to consumers costs that are specifically prohibited by law, the group said.
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