Auto Insurance

Auto Insurance Rate Rises Halted

The California insurance commissioner today barred automobile insurers from raising their rates for six months while the state grapples with how to put into effect a rate-cutting initiative approved by voters last year.

Commissioner Roxani Gillespie took the action after the Farmers Insurance Group, one of the state’s largest auto insurers, said last week that it would raise its rates 5.9 percent on Nov. 1, and other insurers indicated they would follow suit. Farmers was the first big automobile insurer in California to seek a rate increase since the passage of the initiative 11 months ago.

Ms. Gillespie said the freeze would protect consumers while the California Department of Insurance sorted out the confusion surrounding the initiative, which mandates a 20 percent rollback in auto and other property and casualty insurance premiums in California. A number of legal issues are blocking the rollbacks.

The initiative has been closely watched by insurance companies and consumer advocates nationwide, who say it is spurring rate-cutting movements in other states with high insurance premiums. Fair Rate of Return

After a legal challenge by several insurance companies, the California Supreme Court upheld the initiative in May, but at the same time said insurers should be exempted from the rollback if it denied them a fair rate of return. The court did not define what constituted a fair return, and much of the legal maneuvering since then has centered on that question.

Ms. Gillespie said at a news conference in San Francisco today that a final definition of a fair return would be formulated in public hearings that begin Oct. 30.

More : query.nytimes.com

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