State Farm Insurance, California’s largest auto insurer, has applied for an 8 percent average reduction for its policyholders while simultaneously implementing new auto rate regulations, according to the Department of Insurance. Similarly, the Chubb Group of Insurance Companies will be lowering its automobile insurance rates in California by an average of 34 percent. Chubb also said it is rolling out new coverage options including high limits of liability protection in a state where the number of uninsured and underinsured motorists is among the highest in the nation.
State Farm’s action means that about 2.8 million policyholders will see an annual reduction in premium rates totaling $204 million, according to the company. That amount, combined with earlier auto rate reductions by the Auto Club of Southern California and USAA Insurance, brings the dollar savings for consumers to nearly $370 million since auto rate reforms were introduced last year, Commissioner John Garamendi said in a statement.
Policyholders who have maintained their policies with State Farm for an extended period of time and those who also have property insurance with the company — home and condo owners or renters insurance — will receive enhanced benefits under the new rates. A driver with three years continuous coverage will see his or her loyalty discount increase from 8 percent to 10 percent. A policyholder with at least six years of continuous coverage will see his or her discount go from 16 percent today to 20 percent under the revised plan, the company said.
The discounts for insuring homes and autos with State Farm will increase from 10 percent to 12 percent for renters; 12 percent to 14 percent for condo owners and 15 percent to 17 percent for home owners. Homeowners who also have a personal liability umbrella policy with State Farm will received a 20 percent discount, up from the current 18 percent.
Chubb said its rate reductions will vary based on factors such as driving record and driver characteristics, with some drivers enjoying a reduction of nearly 50 percent. Chubb also has doubled to 10 percent its good-driver credit. It has introduced a companion credit ranging from 10 percent to 20 percent off the auto insurance premium for customers who also have a Chubb homeowners policy.
“These new liability coverage options are especially important for affluent drivers in a state where a recent study by the Insurance Research Council found that 25 percent of the drivers are uninsured,” said Kurt Morgan, California manager for Chubb Personal Insurance. “What’s even scarier is that uninsured motorists are far more likely to be involved in accidents involving injury.” Mississippi is the only state with a higher number of uninsured motorists (26 percent), according to the study.
“Uninsured motorist coverage is one of the least understood features in an auto insurance policy. It helps protect you and your family against the other guy, who either doesn’t have insurance or not enough of it,” Morgan added.
Like other insurers — Auto Club of Southern California and USAA Insurance — Chubb and State Farm submitted class plan filings with the California Division of Insurance to comply with newly imposed auto rate regulations.
Work on reforming California’s auto rate regulations began last year, with the Commissioner fighting to require insurers to give more importance to how safely someone drives than where the person lives when pricing auto insurance. Specifically, the regulations issued by the Department and upheld by a Sacramento Superior Court ruling last month, requires insurers have to give more weight to three factors –driver’s safety record, number of years driven and annual miles driven — than any other auto rating factors. Insurers are required to comply with at least 15 percent of the regulations now, with the rest of the adjustments factored in over the next two years.