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Allstate, Geico, Kemper, Liberty Mutual and State Farm are not allowed to raise prices by California

SACRAMENTO, Calif. (AP) – Top U.S. insurers and associations say California is at risk of a crisis in the nation’s largest auto insurance market by refusing to approve any rate hikes. for more than two years, since the beginning of the coronavirus pandemic.

The companies slashed and said they couldn’t continue operating at a loss while Insurance Commissioner Ricardo Lara delayed rate lawsuits filed by companies representing three-quarters of the California market. submit. AllstateGeico, Kemper, Liberty Mutual and State Farm both said they paid more than they collected in California premiums in the first half of the year, even though they was profitable as recently as last year.

It’s part of Lara’s effort to compensate the consumers he says was overcharged during the early months of the pandemic, when traffic disappeared after California imposed the nation’s first stay-at-home order. His office could not say how much it thinks insurers still owe, but advocacy group Consumer Watchdog puts the amount at more than $3 billion.

“The data we collect directly from the insurance companies themselves shows that many of them can’t come back completely Insurance Commissioner Michael Soller said. Part of the department’s efforts is to “enable consumers who continue to be overcharged for premiums during the pandemic.”

But a state appeals court ruled last year that Lara cannot be imposed “Retroactive Rates and Refunds.” The state’s Supreme Court declined to review and while Lara’s office narrowly interpreted the ruling, insurers said it was an outright ban on his efforts to claim additional reimbursement.

The dispute came as Lara ran for re-election against Republican Robert Howell, who was not expected to pose a serious threat to Lara’s re-election.

“The commissioner is an elected official and he is trying to serve his constituents in a way that is not beneficial to his constituents,” said David Russell, a professor of insurance and finance at California State University, Northridge. market forces. “But if you drop the price, you’ll have a availability problem.”

It’s similar to the dilemma companies face in insuring homes in wildfire-prone areas or along the Florida coast, he said.

“There is an obvious, and avoidable market meltdown,” three associations representing insurance companies that write more than 90% of auto insurance premiums in California warned Lara in April.

“Auto insurance companies cannot operate indefinitely in California without the ability to collect adequate premiums,” said the National Association of Mutual Insurance Companies, the California Federation of Human Insurs, and The American Property Accident Insurance Association (APCIA) said in their joint letter. “Criticism of decisions made during the pandemic, including allegations by some that insurers should have provided more relief to customers, does not justify ignore current financial realities.”

Since pandemic restrictions were eased, traffic has returned to almost where it was in 2019 before the coronavirus hit, while drivers have become safe cream so collision, injury and death There has been an increase, said Bob Passmore, APCIA vice president and automotive claims expert. Deaths light fall for the first time last spring in two years, but any drop in those payments was offset by supply chain shortages and rapidly rising inflation.

Harvey Rosenfield, founder of Consumer Watchdog, said insurers should pay back their pandemic funds, but Lara has not proposed the necessary regulations to make them do so.

“Actually, we don’t know exactly what the commissioner is doing other than… he doesn’t approve of the rate increase,” Rosenfield said. “So while I don’t think any company should raise fares until they return what they took illegally from California motorists, it has to be done through a official procedure.”

Thirty-eight interest rate hikes have now been backed up, along with five new claims filed this month.

Since then, in August, Geico has closed three dozen brick-and-mortar stores in California and stopped allowing motorists to buy insurance over the phone, though it still allows online sales.

Progressive President and CEO Tricia Griffith said in an earnings call last month that the company has slow down its growth in California because of the ban, while Allstate stopped using independent agents and tried to limit customers’ payment options until Lara’s office blocked it.

“Letting them do things here in California shows the ability to recover as much as possible, that’s a sign of an unhealthy market, and we think that’s directly tied to the fact that the insurance commissioner hasn’t looked at rate records for 2 1/2 years,” said Denni Ritter, APCIA vice president for state government relations.

Insurers say Massachusetts and New York have also stopped considering rate hike requests during the pandemic but have now started again.

Joseph Lacher Jr., president, chief executive officer and president of Kemper said in a meeting earnings call last month.

“In the relative short term, my personal belief is that we will start to see the market pick up,” he said. “And I just hope the commissioner doesn’t push it to that extent because it will take a long time to restart it.”

Rosenfield doesn’t think the industry is in trouble, but he worries that Lara’s inaction could give insurance companies grounds to challenge him in court.

“If there is a tactic that the insurance industry has perfected, it is trying to blackmail the public by threatening to pull out,” he said.

Rosenfield thinks companies are taking the opportunity to single out their best customers to increase profits by making it harder for higher-risk consumers to buy insurance. But he criticized Lara for “arranging a crisis” by not using his regulator to prevent what he believed was discriminatory behavior by insurers.

Insurers have refunded a total of $2.4 billion to California drivers during the pandemic, though Lara calculates that reimbursement isn’t much compared to what consumers pay. must return. The state has 137 licensed insurers that collected more than $17 billion in private passenger auto insurance premiums in 2020, Soller said.

“Californias today have many options for auto insurance in this highly competitive market and we will make sure it stays that way,” Soller said.

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