Auto Insurers, Regulators Clash Rising Auto Insurance Rates Have Stirred Up Consumers and Prompted Regulators to Hold Rates Down. but Insurers Say They Can't Make a Profit

By Elizabeth Levitan Spaid, writer of The Christian Science Monitor | The Christian Science Monitor, October 7, 1991 | Go to article overview

Auto Insurers, Regulators Clash Rising Auto Insurance Rates Have Stirred Up Consumers and Prompted Regulators to Hold Rates Down. but Insurers Say They Can't Make a Profit


Elizabeth Levitan Spaid, writer of The Christian Science Monitor, The Christian Science Monitor


RISING auto insurance rates have set insurers and state regulatory agencies on a collision course.

In California, Massachusetts, and New Jersey - states with the highest auto insurance premiums, the action has taken on the air of a demolition derby. Several insurance companies have retired from the field. In many other states, insurance companies are feeling battered as consumer dissatisfaction with rates prompts increased regulation.

"Basically the trend is for tougher regulation, more-independent and stronger commissioners, and more active rate regulation," says Stephen Brobeck, executive director of the Consumer Federation of America. "In those states {that follow this course} ... there will be an increase in the chances of insurer withdrawal."

New Jersey's largest auto insurer - Allstate Insurance Company - recently opted to leave the state after regulators refused its requested 28 percent rate increase. The company claims rate restraints there have caused it to lose more than $450 million in the last 20 years.

Industry association officials list other states which, they say, don't allow insurance companies to cover their costs and make an adequate profit on auto insurance. These states include Texas, Delaware, Pennsylvania, Nevada, Rhode Island, South Carolina, New Hampshire, Georgia, Louisiana, and the District of Columbia.

"The price of the product is increasing at twice the rate of inflation. That's been the experience through the 1980s, so there's political pressure to do something about it," says Sean Mooney, an economist at the Insurance Information Institute, an industry research organization.

In California, a citizen revolt in 1988 led to the passage of Proposition 103, a rate-rollback measure. The state is still embroiled in a legal battle with the industry over whether the state can force auto insurers to cut rates.

Other states and cities are moving to trim insurance costs:

*The Michigan legislature is considering a bill that would roll back rates by 15 to 20 percent.

*Texas plans to allow greater opportunities for competitive rates on a three-year trial basis beginning in September 1992.

*The New Mexico legislature passed a bill that would require insurers to cut rates by 20 percent.

*Proposals to create a quasi-government insurer or give a single insurance company a monopoly in return for reduction in rates are being considered in Philadelphia, Baltimore, and Detroit. …

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