Garamendi Announces Auto Rate Settlement : Insurance: But some call the rebate agreement with a Northern California firm a ‘hollow victory.’
California Insurance Commissioner John Garamendi, still stinging from a recent court setback that rejected his regulations for implementing Proposition 103, said Wednesday that one of Northern California’s largest auto insurers has agreed to rebate $71.8 million to its policyholders--less than half the amount the state had originally sought.
The agreement left some insurers wondering whether Garamendi is softening his stance against the industry.
But the commissioner called the settlement a “victory for policyholders,” noting that the $71.8 million that the California State Automobile Assn. agreed to pay--coupled with dividends it paid several years ago--are roughly the equivalent of the 20% rollback in premiums called for by the controversial insurance proposition.
“If the commissioner is calling that a victory, it’s certainly a hollow one,” said John Millen, a spokesman for Los Angeles-based Farmers Insurance Group, which has steadfastly refused to issue Proposition 103 refunds.
Garamendi swept into office in 1991 as the state’s first elected insurance commissioner largely on his promise to force insurers to comply with Proposition 103, which called for a 20% across-the-board reduction in property and casualty insurance rates and rebates of excessive premiums paid between Nov. 8, 1988, and Nov. 8, 1989.
But in a victory for insurers, a Superior Court judge in Los Angeles ruled last month that Garamendi’s plan to implement Proposition 103 was unconstitutional because it unfairly limited all insurers to a maximum 10% return without providing them with individual hearings to determine a fair level of profit. Garamendi has said the decision will be appealed.
About 1 million CSAA policyholders will be eligible for the refunds, which the association said will average $77 for auto insurance customers and $31 for homeowners.
When Garamendi issued the first wave of rollback notices to insurers in 1991, he originally estimated that CSAA owed its policyholders about $157 million in Proposition 103 refunds.
But as part of the settlement announced Wednesday, CSAA was given credit for $155 million in regular dividends it returned to policyholders for the 1988-89 rollback year and agreed to return an additional $72 million over the next few months.
When the $155 million is added to the $72 million in refunds the association will soon pay out, the total of $227 million is equal to 18.2% of the premiums the association collected in the rollback year and roughly equivalent to the 20% Proposition 13 rollback.
