LOS ANGELES, Dec. 17, 2024 -- Consumer Watchdog reached a settlement with United Financial Casualty Company and the California Department of Insurance last week, resolving the company's application with the Department for a rate increase of 11.24% to its private passenger automobile line of insurance and saving California policyholders a total of more than $47 million.
United Financial originally sought a rate increase of 16.1%. Consumer Watchdog challenged the rate hike as excessive under Prop 103 and the Department's ratemaking regulations, which require insurers to justify all rate changes prior to implementation.
Specifically, Consumer Watchdog challenged United Financial's trend selections as overstating projected losses and giving too much weight to recent losses, resulting in an inflated rate indication. Consumer Watchdog also argued that United Financial failed to properly exclude expenses for institutional advertising (ads designed to improve the company's image rather than aimed at selling specific insurance products). "With insurance companies constantly seeking higher and higher rate hikes, it is critical that these applications are carefully scrutinized," said Consumer Watchdog Staff Attorney Benjamin Powell. "When they are, it's often the case that companies are exaggerating their losses and trying to squeeze as much out of consumers as they possibly can."
Consumer Watchdog requested that United Financial provide further information in order to substantiate its claims about losses and other information in its application. Through this exchange of information and Consumer Watchdog's advocacy, it ultimately achieved a lower rate increase of 11.24%. "Consumer participation is critical to reining in insurance companies and their too-frequent rate hikes," Powell continued. "This matter shows that when companies are held accountable for the lack of justification in their requests for rate increases, we see real impacts to consumers and their wallets." The company's newly-approved rate will have an effective date of January 1, 2025, and will affect more than 558,000 policyholders.
Amidst these negotiations, a conflict broke out between the Insurance Commissioner and the Department of Insurance's Chief Administrative Law Judge, Kristin Rosi. The conflict centered on decisions issued by Rosi finding that the Department had not been properly following its own regulations or the purposes of Proposition 103, and concluding that all settlements of rate matters must be reviewed by an Administrative Law Judge to ensure they are "fundamentally fair."
In response, the Department issued an internal delegation order purporting to limit or preclude the ability of its Administrative Law Judges to review proposed settlements unless the Department allows a matter to proceed to a hearing. Judge Rosi held a hearing last Friday on these issues, at which Consumer Watchdog appeared to defend and advocate for the rights of consumers and to support the Administrative Hearing Bureau's ability to review settlements for fundamental fairness and compliance with Prop 103. Following Friday's hearing, Consumer Watchdog filed the settlement stipulation in the United Financial rate proceeding with the Administrative Hearing Bureau in line with that procedure.
California's voter-approved insurance reform law, Proposition 103, requires that insurers open their books and prove they need to raise rates in a process subject to full transparency, in which consumer representatives have the right to review and challenge improper rates and practices. According to the Consumer Federation of America, Prop 103 has saved California motorists over $154 billion since 1989. Consumer Watchdog has saved California consumers over $6 billion over the last 22 years by challenging excessive and unfair auto, home, business, and medical malpractice rates.
For more information about Proposition 103 visit: https://consumerwatchdog.org/prop-103/.
Download the settlement stipulation here.
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