Quackenbush slashes proposed CAARP rates; request for 12.8% rate hike cut by more than half.

LOS ANGELES--(BUSINESS WIRE)--March 15, 1995--Insurance Commissioner Chuck Quackenbush has slashed a proposed rate increase by the California Automobile Assigned Risk Plan by more than half, cutting the plan's proposed 12.8 percent increase to 5.2 percent.

Including allowances for profits and contingency factors, the rate hike proposed by CAARP could have grown to as high as 20 percent.

"While a minor adjustment is appropriate, the rate increase sought by the assigned risk plan is unwarranted," Quackenbush said.

The plan applied for the rate increase last September, the result of a 1994 agreement between it, the Department of Insurance and consumer groups settling a legal dispute over the CAARP's 1989 proposal to increase assigned risk insurance rates by 112 percent. As a result of the agreement, a 1990 interim rate hike of 85 percent was allowed to become permanent, and the CAARP agreed to withdraw its lawsuit and submit a revised rate filing within six months.

Last January, the Department held a public hearing to consider CAARP's new rate request hearing testimony from the plan as well as insurance industry and consumer group representatives. Based upon that testimony, Quackenbush said that he was not convinced that CAARP was entitled to its full request.

"Testimony showed that loss trends in the private passenger market continue to be favorable. Because of these trends, I agree with consumer group actuaries' findings that the assigned risk plan simply does not need the substantial increase that it seeks," Quackenbush said.

In 1993, legislation was enacted requiring the program to receive no subsidies from the voluntary auto insurance market. The legislation stated that premium charges "shall not be excessive, inadequate, nor unfairly discriminatory, and shall be actuarily sound so as not to result in a subsidy of the plan."

Since the 1990 rate increase and the passage of the legislation, CAARP's assignments have dropped nearly tenfold. In 1989, 1.25 million drivers were assigned to insurers via the program. It is currently on a pace to assign up to 144,000 drivers.

The assigned-risk program was created to provide auto insurance for California motorists unable to obtain coverage in the private market due to their driving records or other extraordinary circumstances. The program assigns the drivers to private insurers based upon the companies' share of the auto insurance market.

CONTACT: California Department of Insurance, Los Angeles 

Candysse Miller, 213/346-6367

or

Richard Wiebe, 916/445-5544