Auto Insurance
California Moves to Force Insurers To Pay $2.5 Billion in Policy Rebates
The California Insurance Department acted today to force the insurance industry to pay $2.5 billion in rebates to consumers. A spokesman for the industry said it would almost certainly fight the move in court.
In the latest effort to impose the rate-cutting provisions of an insurance-overhaul initiative passed by the voters nearly three years ago, State Insurance Commissioner John Garamendi outlined new regulations that he said would result in rebates to holders of 20 million automobile, homeowner and fire policies in effect during 1989. Mr. Garamendi said the rebates for auto insurance would average more than $100 a car for that year.
If they withstand court challenge, the regulations will also serve as the basis for the Insurance Department’s future rate-setting calculations and could result in reductions in the current rates charged by some companies. Limits on Operating Costs
The regulations include a formula to determine the profit margins that insurers will be allowed. And they set limits, for the first time, on insurers’ operating and salary costs by forcing companies whose costs exceed certain proportions of their revenue to pay for them out of their profits rather than by raising rates.
Harvey Rosenfield, the chairman of Voter Revolt, a consumer advocacy group active in the insurance overhaul effort, called the new regulations “a historic advance” for insurance consumers and said they would spur similar moves by other states.
More : query.nytimes.com
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