Thanks to our summer intern Matt Caris (who has returned to finish his senior year), we have brought you stories about just how little control the Illinois Department of Insurance has over the rates of property and casualty (well for that matter most insurance lines) in the state. Well, an article in the New York Times from Saturday takes a look at rising auto insurance rates and asks the questions: What is going on? What can states do about it?
J. Robert Hunter, the Director of Insurance for the Consumer Federation of America, has been trying to draw attention to this issue of rising rates for consumers even though Americans are driving far less.
“As Americans drive less because of the price of gas, fewer claims will
be filed with insurance companies,” Mr. Hunter said in a letter to the
nation’s governors in June. “Whether this will mean windfall profits
for insurers or rate cuts for the consumers is up to governors and
state regulators to determine.”
According to the Insurance Information Institute, rates are still falling in California, while the rest of the nation has seen a recent increase in rates over the past year. As we have pointed out in the past, California has comprehensive insurance reforms and has the right to deny rate increases, as well as, call for public hearings to make insurance companies justify rate hikes.
Even states that have less regulation than California, show what some regulation can do to benefit consumers. The NYTimes article points out recent New York actions, which I think are quite telling:
New York does not hold public hearings, but its insurance department
can still approve or deny requests for auto rate increases. This month,
with 48 applications pending, the department decided to challenge one
insurer, Geico, on whether it had taken gasoline prices and New
Yorkers’ reduced driving habits into account when projecting its claims
costs.
The question prompted Geico to withdraw its proposal for
an increase, which would have applied to 75 percent of its car
insurance business in New York. Geico is still pursuing a rate increase
for the remaining 25 percent, which covers New York’s riskiest drivers,
but has scaled back the size of the increase, said Mr. Moriarty of the
department. A Geico spokeswoman, Rachel N. Veness, declined to discuss
the company’s next steps, citing “the highly competitive nature of our
business.”
Unfortunately, we all know too well in Illinois that we cannot do anything about the rate hikes that have been levied on us. The state does not have the power to regulate rates, call for public hearings, or even request information about why companies are charging the rates they do. Gosh, I am in the wrong industry... with the lack of oversight by Illinois, auto insurers can commit "highway robbery," and the state (or consumers) can't do anything about it.
If we are required to carry auto insurance, you would hope that insurance companies would be required to be accountable to someone.