California Insurance Commissioner Steve Poizner has come under attack from consumer advocates for a proposal to deregulate insurance rates and allow insurance companies to raise rates on homeowners, motorists and business policyholders. The California Department of Insurance held a public hearing on prior approval regulations on Friday, December 12.
According to Consumer Watchdog, the proposals put forth at the hearing would allow insurers to defy insurance reforms established under Proposition 103. Harvey Rosenfield, who authored the 1988 insurance measure Prop 103, said: “The current proposals are a windfall for insurance companies that will force California consumers to pay far more for insurance than they do now. They amount to deregulation of insurance rates at a time when the nation is grappling with the disastrous cost of two decades of deregulation of the financial markets. Were these changes to take effect, the cost to Californians will be in the hundreds of billions of dollars.”
Consumer Watchdog said the additional rules proposed would:
-Allow insurers to delay full implementation of substantial rate cuts;
-Allow insurers to decrease rates without full Department review and public scrutiny that is necessary to ensure that decreases are sufficient and also to protect against irresponsible financial practices, akin to the sub-prime lending and workers compensation disasters of recent years;
-Get rid of rules that strictly limit the way insurance companies project claims payouts; and
-Increase the amount of expenses that companies are allowed to pass through to customers and limit the incentives for more efficient companies.
Read a chart of the changes and what Consumer Watchdog believes to be their potential impact at: www.consumerwatchdog.org/resources/PoiznerDeregulationPlanChart.pdf.
Sources: Consumer Watchdog, DOI
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