DEL.ICIO.USPublished on: 05/01/08
About 30 auto insurers will be ready to change their rates in Georgia without state approval if Gov. Sonny Perdue signs a bill passed by the Legislature in March.
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Georgia Insurance Commissioner John Oxendine, whose office has about 30 rate-change cases pending, is worried the bill would lead to skyrocketing auto insurance premiums.
He has asked the governor to veto the measure, which would allow companies to raise some auto insurance rates without first getting the approval of state regulators.
"In the future, if they know they can get whatever they want, the sky is the limit," Oxendine said, citing one company that is requesting a 63 percent increase on some customers.
But others say the market has changed dramatically since the 1980s, when a similar law brought big premium increases. Many drivers now shop for auto insurance online, where they can compare rates.
Allie Wall, executive director of the Atlanta consumer group Georgia Watch, said consumers have more choices now.
"Do I think, like Oxendine, that rates are going to skyrocket? No," Wall said. "I think you have a lot of competition here, and you've got relative ease when it comes to shopping around for a new carrier if rates go up unexpectedly."
Insurers have been trying for years to get lawmakers to change the prior-approval law, arguing that they needed the flexibility to change rates quickly. Bills to change the law regularly stalled in the past.
However this year, House Insurance Chairman Tom Knox (R-Cumming) tacked the change onto Senate Bill 276 while it was in a House subcommittee. Moving with speed seldom seen on such controversial legislation, it zipped through both chambers one day in March with little discussion.
Under the bill, the commissioner would still approve rates for the minimum mandatory liability coverage. But Oxendine said 90 percent of drivers have coverage that exceeds the minimum. Critics of the bill also say it would make it virtually impossible for Oxendine to rule after the fact that rates put in by insurers are excessive.
Under current law, the commissioner and his staff review rate filings, and he decides whether the companies get what they want. In some cases, he gives them smaller rate increases than they request.
As an example of the kind of cases he has pending, Oxendine cited a request by 21st Century Insurance Group, a subsidiary of mega-insurer AIG. It has a pending rate increase that averages 17.4 percent, with some customers potentially seeing rates rise 30 percent. AIG's lobbyists backed the changes proposed by Senate Bill 276.
Oxendine said another company, Amica Mutual Insurance, is asking for increases of 63 percent on some drivers. A third, American National, wants 120 percent increases on some motorcycle owners. However, in those cases, the average rates would go down, so many drivers could see lower costs if the filings are approved.
A report out last week from the Consumer Federation of America suggested that consumers are better off in states that force insurers to get advance approval from regulators before they change rates.
From 1989 through 2005, auto insurance expenses generally rose slower in the 15 states that require prior approval of rates, the group found. In Georgia, insurance expenses for drivers rose 47.6 percent, which was slightly below the national average. Expenses rose more than 100 percent in some states that don't mandate insurers get the prior approval of states.
"It is very clear that consumers fare best under a system of prior approval of insurance rates," said J. Robert Hunter, the group's director of insurance and a former state and federal insurance regulator. "It is also clear that as regulation is weakened, insurance consumers are worse off."
Perdue has not said whether he'll sign the bill. However, after it passed in March, the governor told reporters, "I have got some concerns, based on what I hear, and we'll look at it very carefully."
Perdue was a state senator when lawmakers put the current system into effect.
During the 1980s, the state allowed insurers to charge new rates before the commissioner approved them, but rising premiums brought a political backlash and became an issue in the 1990 campaigns. The insurance commissioner at the time was ousted by voters. The next year, Gov. Zell Miller and the new commissioner, Tim Ryles, pushed through prior-approval legislation.
Sen. Steve Thompson (D-Marietta) remembers what it was like in the 1980s, and he voted against Senate Bill 276 when it was brought up for final approval in March.
"I still don't think you ought to take it away from someone with oversight," Thompson said. "It doesn't make sense to me to let them automatically increase their rates."
But Sen. Cecil Staton (R-Macon), whose bill was amended to include the "no-prior approval provisions," said he supports the measure because it "brings free-market principles" into the pricing of auto insurance.
He said Oxendine "is ultimately concerned about his influence and his power and the power he wields over the insurance companies of this state."
Oxendine recently announced plans to run for governor in 2010. That, Staton suspects, has a lot to do with his very public stand against Senate Bill 276.
"I think this is grandstanding," Staton said. "I think he is trying to sound the alarm for a fire that doesn't exist. He is in campaign mode."
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Comments
By CRB
May 6, 2008 4:05 PM | Link to this
How many people with new cars are able to carry just the state regulated minimum coverage? This legislature will potentially seriously gouge anyone who buys a new car and is required to carry more than simple liability.
By JP
May 2, 2008 9:36 AM | Link to this
You can never truly bring market influences into the insurance industry because auto insurance is compulsory. So yes, this bill scares me.
By john
May 1, 2008 3:02 PM | Link to this
Quit whining about it. Insurance companies NEED more money in order for their highly paid CEOs to get gold plated toilets! Besides, government is not here represent the people, we are here to make rich people richer!!!
By reader
May 1, 2008 1:36 PM | Link to this
mrwesco @ 12:42 PM:
The Court of Appeals of GA, NOT the Legislature, decided that umbrellas cover uninsured motorists. (Abrohmas v. Atlantic Mutual Insurance Agency) The legislation being discussed (SB276) FIXES the problem created by the Court.
Regarding opt in/out, under the terms of the bill, there is no coverage for uninsured motorists unless the policy affirmatively provides for such coverage. The consumer has the choice.
For the rates, did anyone notice the comment on the filings in the article? "However, in those cases, the average rates would go down, so many drivers could see lower costs if the filings are approved."
By Susan Norman
May 1, 2008 1:33 PM | Link to this
For Clark Howard - or anyone - to tout recent reductions in New Jersey's auto insurance rates is ridiculous. New Jersey for years has had the highest rates in the United States. One of the consumers celebrating his rate reduction in the The NY Times article is thrilled about paying $1,273/year to insure his 1997 Mercury Mountaineer! The bigger question in Georgia is why our elected leaders would rush through this major change in state regulatory policy in a single day. Very few in each chamber stood with the consumers. It's time for voters to wake up and hold these sell-outs accountable, starting with Rep. Tom Knox R-Cumming.
By mrwesco
May 1, 2008 12:42 PM | Link to this
I have an Umbrella Policy and just received my 2008-2008 billing...UP 230% repeat up 230%. I called my insurance company and they said call the Georgia State Legislature. Seems our mindless elected morons decided that Umbrella Polices now have to cover Uninsured Auto riders. There is an opt-out, however, it should have been a opt-in!!!
Our elected officials are absolutely
ignorant when it comes to thinking through unintended consequences.
If we have a Uninsured Motorist problem (I am sure we have) then they should deal with the problem on a individual basis, ie, each Motorist who does not have insurance should not be allowed to drive. Deal with illegals and much of the problem will disappear.
In the meantime, motorist, such as myself are getting raped with increase rates and our elected officials sit around "fat-dumb and happy" unaware of they messes they create each time the meet in the Atlanta.
Let the markets work and let them fail as necessary but keep politics out of the free market system.
And lets keep our elected officials at home...where they can do lesser harm to the taxpayers.
By Mike
May 1, 2008 12:24 PM | Link to this
Sounds like Ga. Watch is watching the backs of the insurance industry and trial lawyers. Don't let us down Sonny.
By BB
May 1, 2008 12:19 PM | Link to this
Here is the excerpt from the Clark Howard show on 11/27/07 about this very issue.
Clark: I have a strong belief in the free market. In fact, I have such a strong belief in the free market that sometimes I fail to see circumstances where maybe the free market is not the best way to go. But do I have proof for you today how valuable the free market is.
New Jersey has long had the most expensive auto insurance rates in the country. The politicians in New Jersey came up with endless rules for auto insurers. They decided essentially everything, including whether insurance adjustors were allowed to have decaffeinated or regular strength coffee when they went out to adjust a car. Iım kidding about that one, but it was that extreme where every last thing an auto insurer did was decided not by the market, but by the state.
Insurers, completely hemmed in, left the state of New Jersey, more and more left. There was really no real insurance market for car insurance in the state of New Jersey, and the rates were sky-high.
Well New Jersey finally got free market religion three years ago and started lifting all the rules that told insurers what they had to do. Whatıs happened since is extraordinary.
Insurers in large numbers have come back to the state of New Jersey; 75% of drivers are now paying less than they were before. According to the New York Times the average savings that somebody is paying is around 30% less than they were paying three years ago.
Now, this is so instructive because anytime you have actual real competition, the marketplace can exert discipline. People enter a business, they think they can make money.
Eventually too many people enter that business if there arenıt what are known as ıbarriers to entry,ı New Jersey had those, insurers would not come in, there was nobody competing. So the prices went up and up and up, plus all the state mandates.
So by New Jersey saying, hey come back in, have a free-for-all -- insurers have returned in large numbers, and premiums at first may have gone up a little but the effect has been that residents of New Jersey are paying less and less money.
You know, I know as someone who people put a consumer advocate hat on, Iım supposed to always be in favor of government watching out for things. And I am in favor of an insuranceıinsurance is done by states, that the state play a role in making sure that insurers live up to their commitments, that if somebody has a claims problem, that the state is there to assist you; if an insurer is not returning your phone call the state is there to help you.
But in terms of the pricing, thatıs where the marketplace should reign supreme. And, not in just in that business, but any business weıre better off letting the free market go at it.
Now I know right now there are a number of people andıdo I dare even mention the word ıWal-Martı?ıthere are a number of people who want to limit Wal-Martıs ability to grow, because Wal-Martıs prices have been so low that other retailers apparently have had trouble competing. Now that is an interference in the free market. Youıve gotta let the free market work and the free market sort things out.
Our number toll free is 1-877-87-CLARK.
Ends: 26:23
(followed by a call from a listener asking for advice on retirement)
By brooksdawgs
May 1, 2008 12:07 PM | Link to this
I have attempted to let my opinion by known. I have sent and email to our gov. requesting the use of his veto pen. Please do so yourself.
http://gov.georgia.gov/00/gov/contact_us/0,2657,78006749_94820188,00.html
By BB
May 1, 2008 12:03 PM | Link to this
It's true that we have to have insurance in Georgia. If you read the bill you will see that Oxendine's office still regulates the minimum limits. The Free Market only comes in when a consumer buys above and beyond the insurance required by Georgia Law. Clark Howard says this is a good thing. He said that other states, like New Jersey, passed similar legislation and the insurance rates decreased.
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