Auto Insurance Fraud

From KPSP Local 2 News

California's Insurance Commissioner is warning drivers to be on alert for scam artists who stage auto collisions. It's a costly and potentially form of auto insurance fraud. One such scam, nicknamed the swoop and squat happens when two or three vehicles work as a team, to set up an "accident." The lead car cuts the victim off, and another car pulls up alongside the victim, so he/she has no choice but to rear-end the scam artist.

Insurance Commissioner Steve Poizner says even if no one gets hurt, insurance fraud hurts the consumer, in the form of higher auto insurance rates. He says, "Insurance fraud is like a $500 tax on every man, woman and child in California." Poizner says auto insurance fraud is a major part of the problem. The California Department of Insurance investigated 14,565 suspected automobile insurance fraud cases in 2006 and 2007.

Mercury Cuts California Auto Insurance Rates

Mercury General Corp., today is expected to announce rate cuts for about 1.7 million of its California automobile insurance and homeowner insurance customers, mainly in Southern California.

The owners of 1.5 million cars will shave 3% off their annual bills, about $30 per vehicle, according to the California Department of Insurance. Savings statewide should total $41 million a year. Mercury is the third-largest auto insurer in California, with 9.7% of the market.

The auto insurance rate reductions were based partially on new state criteria that downplay the importance of the ZIP Code where a car is typically parked overnight. The cut took effect in May but had not been announced, the department said.

California has had the country's most heavily regulated insurance business since voters approved Proposition 103 in 1988.

Mercury's new rates for homeowner insurance, which take effect in August, will drop by 10% for 224,000 customers. That represents individual savings of about $100 a year for homes in Southern California and $83 elsewhere in the state.

Renters' premiums will drop by 33%, saving approximately $85 a year for Mercury's customers in Southern California and slightly less in other parts of the state, the department said. The company is the state's eighth-largest homeowner carrier, covering about 3% of insured dwellings.

The savings should be a big help for renters, about 40% of California's population, especially those who may have lost their previous homes to foreclosure because of the sub-prime mortgage crisis, the department said.

Under Poizner, savings from a number of automobile insurance rate reductions totaled about $1 billion for 2007 and so far in 2008. Homeowners' savings during the same period were $558 million, the Department of Insurance said.

Mercury's cuts in auto insurance rates are in line with recent industry trends in California. For the last few years, insurance companies have earned strong profits with declines in accident frequency and severity.

Homeowners' rates also declined under pressure from regulators but may be poised to rise again, industry analysts said. The state's three biggest companies, covering more than half of insured homes, have requests for rate hikes pending.

Allstate Auto Insurance rates in California

California automobile insurance rates from Allstate Corp will be almost 16% lower as of May 12, as Allstate complies with a state mandate.

The reduction comes as California Insurance Commissioner Steve Poizner warned he would not accept further delays to his rate-cut order made earlier this year.

Allstate, the largest publicly traded car and home insurer in the United States, had earlier contested the order.

Poizner had ordered the rate reductions in March after determining Allstate's automobile insurance rates were excessive. The cuts were ordered to take effect on April 28.

The auto insurance rate cuts will save consumers an estimated $250 million a year and average approximately $124 per year for Allstate customers.

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Auto Insurance Rates

The state of California has saved its residents $62 billion over the past 20 years or so do to theitr unique auto insurance rules.

New Jersey, Hawaii, New Hampshire and Pennsylvania also have served their drivers well by keeping auto insurance rates relatively low, but drivers in other states have watched their costs skyrocket.

California ramped up its automobile insurance regulatory system in the late 1980s, making it tougher for companies to raise their insurance rates.

Nationwide, the average cost of auto insurance jumped by 50% between 1989 and 2005. Other states where price hikes were held down, relatively speaking, included New Jersey with a 20% increase in that time period; Hawaii, 25%; New Hampshire, 30%; and Pennsylvania, 31%.

With the exception of New Hampshire, those states have systems in which insurers cannot put auto insurance rate changes into effect without state approval.

States with the steepest rate changes were Nebraska, where average per-car costs surged 118% and South Dakota, where costs jumped 107%.

Other high-increase states include: Montana, 104%; Wyoming, 101%; and Kentucky, 100%.

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Allstate to exit Auto Insurance Market in CA

California drivers argue that Allstate must lower its
California auto insurance rates by almost 19% under
new insurance regulations rules that limit excessive
profits in a Department of Insurance hearing that began
today in San Francisco, CA.

Allstate, the nation's second largest auto insurance
company, seeks five exemptions to the rules that determine
auto insurance rates, despite the company's above-average
profitability.

The Foundation for Taxpayer and Consumer Rights has determined
that Allstate is overcharging drivers over $300 million per year.

Allstate's net income for 2006 alone was approximately
$5 billion and total shareholder return was 590% between
1994 and 2006.