California Department of Insurance Rejects Request to Investigate Auto Insurer Profits

08/19/96

Business Wire reported that California's Insurance Commissioner Charles Quackenbush has announced that he will deny the Consumer Union's request that the California Department of Insurance investigate the profits of automotive insurance companies.

Quackenbush said, "The study Consumers Union submitted to support its petition was a seriously flawed analysis that relied on outdated information and misleading assumptions. While it's true that auto insurance is a profitable business, those profits do not even approach those claimed by Consumers Union."

The Department of Insurance's review pointed out several deficiencies in the Consumers Union study:

Consumers Union ignored rate decreases that had been in effect at when it published the study in June.

Consumers Union calculated auto insurance profits using insurers' "imputed surplus," rather than the actual (or statutory) surplus as required by the Insurance Code, thus distorting insurers' rates of return.

Consumers Union compared its auto insurance profits findings to an "excessive profits threshold" that does not exist. The standard was suggested at Insurance Department hearings that dealt with homeowners and earthquake rates. No such standard was established for those or any other lines of insurance.

Quackenbush acknowledged that "premiums remain prohibitively expensive for so many consumers in California," but blamed high rates on " needless costs associated with minor lawsuits, fraud, and exaggerated medical expenses."

Quackenbush invited Consumer Union to join him in working toward the elimination of such unnecessary expenses from the auto insurance system.

Paul Dever -- The Auto Channel