Insurance
Declining profits for health maintenance organizations and tighter regulation of the industry have spurred predictions of higher health insurance rates from HMOs in 1998.
Meanwhile, property and casualty insurance companies are expected to keep prices stable, while enjoying healthy profits.
The past few months have seen a rash of troubles for health insurers such as Santa Ana-based PacifiCare Health Systems Inc. Its struggle to digest FHP International, which it bought in 1996, led to its recent announcement of a pretax charge of $145 million. PacifiCare is one among many troubled HMOs expected to raise insurance prices by 5 percent to 10 percent in 1998.
Property and casualty insurers are likely to have a far brighter year. Companies trending upward include Illinois-based property and casualty provider Allstate Insurance Cos., which had its most profitable quarter ever in the third quarter of 1997. It reported net income of $8.3 billion, 60 percent higher than for the like period in 1996.
Allstate is not alone in earning high profits, which will translate to stable property and casualty insurance prices in 1998.
One big variable in the rosy outlook for property and casualty insurers concerns the possible effects of El Ni & #324;o. Intense storms could result in widespread claims from policy holders whose homes are damaged.
Meanwhile, non-profit and consumer advocacy groups are hoping to score some gains for California drivers in 1998, which may come at the expense of auto insurers. State Insurance Commissioner Chuck Quackenbush is under considerable pressure to force insurance companies to stop using the zip code as a primary factor in determining how much a person pays for auto insurance.
The practice was banned under the 1988 voter-approved Proposition 103, but Quackenbush has allowed insurers to continue giving primary weight to residence location through a loophole in his regulations.
A decision from Quackenbush is also expected early in the year on whether to adjust the pricing for quake insurance offered by the California Earthquake Authority.
In July, the CEA made adjustments to pricing guidelines that resulted in average price drops of 9 percent for earthquake coverage in Los Angeles County. But during public hearings by the Department of Insurance, several consumer groups demanded that the CEA be required to fully disclose the factors it uses to determine policy prices, and that it reduce coverage prices by as much as 30 percent.
Wade Daniels
