California Insurance Commissioner Steve Poizner has ordered Allstate Insurance, the state's seventh-largest auto insurer, to cut its automobile rates by 15.9% -- an average savings of about $133 per car, the Los Angeles Times reports.
The order, which came at the close of a lengthy proceeding before an administrative law judge, was more than twice what the Oakbrook, Ill., company wanted to grant its policyholders. Allstate contends the ordered rate cut is too severe and is considering its legal options.
Allstate's reduction is the latest in a series of rate cuts in California by dozens of automobile insurance companies since the summer of 2006. After losing a protracted court challenge, the industry began complying with regulators' insistence that they primarily base their premium-setting formulas on a person's driving record, number of years behind the wheel and total miles driven annually.
"It was very clear that they were charging too much," said Douglas Heller, the executive director of the Santa Monica-based Foundation for Taxpayer and Consumer Rights, the group that successfully passed Proposition 103 in 1988. The voter-approved initiative turned insurance into a highly regulated business, similar to power companies and other public utilities.
Heller, whose organization had legal standing to participate in the Allstate case, predicted that other auto insurers would propose lowering their automobile premiums in rate submissions scheduled to be submitted to the California Department of Insurance this summer.
According to the March 14 order issued by Poizner, Allstate had requested permission to lower its rates by 7.1%. The department's rate-setting formula calculated that a 19.4% reduction was merited.
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