Auto Club of Southern California To Cut Rates 7 Percent

July 11, 2006

California Insurance Commissioner John Garamendi announced he intends to approve a 7 percent decrease in premium rates for policyholders of the Automobile Club of Southern California. The requested decrease coincides with the Auto Club’s decision to implement the Commissioner’s proposed regulations on the fair pricing of auto insurance, according to the Department of Insurance.

“In 1988 voters approved Proposition 103 and demanded that prices be based primarily on how safely you drive, and not where you live,” said Commissioner Garamendi. “Thanks to the Auto Club’s action nearly 1 million drivers will realize that wish, along with an average annual decrease in their premiums of $134. And, contrary to what many in the insurance industry have claimed, this clearly demonstrates that compliance with the proposed regulations does not necessitate rate increases. I commend the Auto Club for its good work on behalf of policyholders.”

Although the regulations are pending before the state’s Office of Administrative Law, the Auto Club has been actively working with the Department and providing input on early implementation, DOI said.

“We want to thank the Commissioner for deciding to approve our rate decrease so quickly and we are pleased to be in compliance with his proposed new regulations, ” said Thomas V. McKernan, president and CEO of the Auto Club. “This means that our policyholders will be receiving more than $133 million in savings, another step in our ongoing commitment to reduce the cost of insurance.”

The announcement helps to provide support for the Commissioner’s ongoing efforts to compel insurers to change how auto rates are calculated. “The current system hurts good drivers who are penalized simply because they live in the wrong ZIPcode,” said Commissioner Garamendi. “My new regulations will reward good drivers regardless of where they live. I commend the Auto Club for its proactive efforts on behalf of policyholders, and I urge other insurers to follow suit.”

The Department has revised the regulations since their introduction last year. Recognizing the concerns of drivers across the state, the Commissioner’s changes ensure that risk of loss is appropriately represented in the rating factors, the DOI said.

Additionally, insurers will be given two years to fully comply with the new standards, although they must show significant progress towards meeting the goal during the first year after implementation of the regulations.

Source: DOI

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