It is amazing to me that, almost 19 years after its passage (and, believe me, I was firmly against it) CA auto carriers still aren’t all in compliance with 103. It is very simple: three factors (REM: record, experience, and mileage) are more heavily weigted in setting rates than others, like
age, sex, marital status, zip code, what kind of vehicle you drive, etc. I have been in the business since 1985, so I remember what it was like before 103 (similar to what the L & D market looks like today – the Wild West, in terms of rate setting). But 103 only affected P & C. Despite the fact that Ralph Nader and Harvey Rosenfeld were wrong about it lowering CA auto rates 10% (because CA auto carriers are entitled to a “fair and reasonable” rate of return), at least it has created a level playing field, where consumers can shop on an apples-to-apples basis. I never thought I would be defending it. Usually, I think of it as like Groundhog Day, where I wake up every day and it is still there and hasn’t yet gone away. However, if and when all of the carriers finally comply with it, then maybe it will actually do some good. I am tired of constantly explaining to clients how auto rates are set in CA. Most of them never heard of 103, or never voted on it, or don’t even vote. If all the carriers complied, at least more people would begin to realize how rates are set.
More heavily weighted, yes, but those three factors may still not be enough to offset all the others that are used by the carriers. The Raiders???? Noooooo.
OR Fan, we did go thru that “explanation” process when 103 first rolled into reality in Jan 1991. But you must have a different clientele as I find clients are totally disinterested in rate making details per se. They want the best coverage for the lowest price down here. We only get their undivided attention when we explain each coverage and what the limits really mean…it seems they often have never had the limits and coverages explained before. I don’t recall explaining why rates vary other than on physical damage. “Why is this car more than my other one?” etc.
My 50 years in the biz leads me to believe 103 cannot be fairly implemented without creating hardships on some producers. If the rates go up 10% down here and those in the dozen or so metro areas go down say 5%…there is no way my loss ratios don’t go down and metro areas don’t go up. That may well negatively change commission percentages, profit sharing and underwriting standards in metro areas in the long run. I never understood how a population of 225,000 down here is going to help offset the losses of millions in the metro areas. Prop 103 is actuarially unsound and you may have other things to worry about when you wake up in the morning in a few years.
Very well put. If I remember correctly, when 103 went in, the rates, returning to 1980’s levels, actually went up (or was that just on the commercial side?). I don’t remember seeing any premium reductions in No. CA.
All Prop 103 said was that, politically there are only 3 factors that matter with auto rate setting.
Reality is that where you live DOES matter. Driver density, litigation, labor, repair costs, all contribute to the price of auto insurance. All are higher in urban areas.
Reality is also that auto pricing AND rates have decreased dramatically over the last few years, inspite of higher repair and replacement costs, wage inflation, occupancy costs, and inflation in general. These costs decreased independently of Prop 103 due to market efficiencies, improved auto safety, market stability and a host of other factors … but NOT Prop 103!
Political meddling leads to buyer confusion and an inefficient marketplace, oh, and richer lobbiests, lazier politicians and wealthy lawyers.
CC Agent is right, just wait until urban agents are feeling the pinch and they start dialing their lobbiests. One more time with feeling…..
It is amazing to me that, almost 19 years after its passage (and, believe me, I was firmly against it) CA auto carriers still aren’t all in compliance with 103. It is very simple: three factors (REM: record, experience, and mileage) are more heavily weigted in setting rates than others, like
age, sex, marital status, zip code, what kind of vehicle you drive, etc. I have been in the business since 1985, so I remember what it was like before 103 (similar to what the L & D market looks like today – the Wild West, in terms of rate setting). But 103 only affected P & C. Despite the fact that Ralph Nader and Harvey Rosenfeld were wrong about it lowering CA auto rates 10% (because CA auto carriers are entitled to a “fair and reasonable” rate of return), at least it has created a level playing field, where consumers can shop on an apples-to-apples basis. I never thought I would be defending it. Usually, I think of it as like Groundhog Day, where I wake up every day and it is still there and hasn’t yet gone away. However, if and when all of the carriers finally comply with it, then maybe it will actually do some good. I am tired of constantly explaining to clients how auto rates are set in CA. Most of them never heard of 103, or never voted on it, or don’t even vote. If all the carriers complied, at least more people would begin to realize how rates are set.
Farmers raised their rates to comply with the DOI request to not use zip codes as a rating factor!
More heavily weighted, yes, but those three factors may still not be enough to offset all the others that are used by the carriers. The Raiders???? Noooooo.
OR Fan, we did go thru that “explanation” process when 103 first rolled into reality in Jan 1991. But you must have a different clientele as I find clients are totally disinterested in rate making details per se. They want the best coverage for the lowest price down here. We only get their undivided attention when we explain each coverage and what the limits really mean…it seems they often have never had the limits and coverages explained before. I don’t recall explaining why rates vary other than on physical damage. “Why is this car more than my other one?” etc.
My 50 years in the biz leads me to believe 103 cannot be fairly implemented without creating hardships on some producers. If the rates go up 10% down here and those in the dozen or so metro areas go down say 5%…there is no way my loss ratios don’t go down and metro areas don’t go up. That may well negatively change commission percentages, profit sharing and underwriting standards in metro areas in the long run. I never understood how a population of 225,000 down here is going to help offset the losses of millions in the metro areas. Prop 103 is actuarially unsound and you may have other things to worry about when you wake up in the morning in a few years.
Very well put. If I remember correctly, when 103 went in, the rates, returning to 1980’s levels, actually went up (or was that just on the commercial side?). I don’t remember seeing any premium reductions in No. CA.
All Prop 103 said was that, politically there are only 3 factors that matter with auto rate setting.
Reality is that where you live DOES matter. Driver density, litigation, labor, repair costs, all contribute to the price of auto insurance. All are higher in urban areas.
Reality is also that auto pricing AND rates have decreased dramatically over the last few years, inspite of higher repair and replacement costs, wage inflation, occupancy costs, and inflation in general. These costs decreased independently of Prop 103 due to market efficiencies, improved auto safety, market stability and a host of other factors … but NOT Prop 103!
Political meddling leads to buyer confusion and an inefficient marketplace, oh, and richer lobbiests, lazier politicians and wealthy lawyers.
CC Agent is right, just wait until urban agents are feeling the pinch and they start dialing their lobbiests. One more time with feeling…..