Auto insurance rates down since reform
Advertiser Staff and News Services
WASHINGTON — While Californians are getting squeezed by electricity costs, they're getting the best deal in the country on car insurance because of a unique state law, a new study by a consumer group shows.
Auto insurance prices in California declined 4 percent between 1989 and 1998 while jumping an average 38.9 percent nationwide, according to the survey released yesterday by Consumer Federation of America.
Insurance premiums have increased the most in Nebraska (up 81.7 percent from 1989 to 1998), South Dakota (75.2 percent) and West Virginia (65.8 percent), the survey shows.
They have increased the least in New Hampshire (up 2 percent), Pennsylvania (11.7 percent) and Massachusetts (12 percent).
While the study showed an 18 percent increase in rates for Hawai'i during the period, in recent years local drivers who once paid the second-most-expensive auto insurance premiums in the country also have seen their rates decline.
Since insurance reform started in Hawai'i in 1997, auto insurance premiums have fallen more than 20 percent, according to filings with the Hawai'i insurance commissioner's office.
Between 1997 and 2000, Hawai'i went from having the second-most-expensive auto insurance premiums in the country to 11th place.
This year, the state is expected to rank about 18th in the annual nationwide poll by the National Association of Insurance Commissioners.
The drop in Hawai'i rates came after the Legislature passed laws in 1995 to reform workers' comp insurance, primarily by cutting medical fee reimbursements. In 1997, the Legislature tackled auto insurance premiums, which were among the highest in the nation.
Those reforms reduced mandatory coverage requirements and gave the commissioner power to order carriers to file lower rates.
Nationwide, the survey by the Consumer Federation found that consumers spend an annual average of more than $700 per vehicle and $1,500 per household, totaling $100 billion nationwide.
California was the only state that showed a decline for the period. At a news conference, Ralph Nader and other consumer advocates credited Proposition 103, passed by the state's voters in 1988, which tightened insurance regulation.
"California stands out," said Robert Hunter, director of insurance for Consumer Federation, who prepared the study. He said Prop. 103 brought smaller rate increases, fewer uninsured drivers and more insurance companies to the state — as well as fatter profits for the companies.
Prop. 103 required insurance companies to open their books to justify rate increases, gave drivers with clean records a 20 percent discount, allowed banks to sell auto insurance to stimulate competition and required the state commissioner to provide consumers with rate comparisons.
An insurance industry official denounced Prop. 103 as "government price-fixing" and attributed the decline in California's rates to improved highway safety and greater seat belt use, a crackdown on insurance fraud and legal changes that make it more difficult and expensive to file lawsuits in car accidents.
Insurance premiums around the country have declined since 1998 after several years of increases, for those same reasons, David Snyder, assistant general counsel of the American Insurance Association, said.
