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Why is ACIC opposed to the regulations?. Advocates for our customers Basic fairness Market disruption. Public Opinion Torn. My premium should be based on how I drive, not where I live. I live in a less congested area. I shouldn’t have to pay more to

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why is acic opposed to the regulations

Why is ACIC opposed to the regulations?

Advocates for our customers

Basic fairness

Market disruption

public opinion torn
Public Opinion Torn
  • My premium should be based on how I

drive, not where I live.

  • I live in a less congested area. I

shouldn’t have to pay more to

subsidize urban drivers.

the question is ultimately a legal issue
The question is ultimatelya legal issue.
  • What power does Proposition 103 give

to the insurance commissioner?

  • What does Proposition 103 mean?
proposition 103
Proposition 103

Rates shall be determined by the following

factors in decreasing order of importance:

  • driving record
  • miles driven
  • years of driving experience
  • factors adopted by the commissioner that

have a substantial relationship to the

risk of loss

not so clear meaning
Not So Clear Meaning

“While (the Proposition’s provision

on auto rating factors) is reasonably

clear from statutory language,

precisely what it means is not.”

Spanish Speaking Citizens’

Foundation v. Low

no plain meaning
No “Plain Meaning”

“(There) is strong circumstantial

evidence of problems that cannot

be resolved by any statutory

‘plain meaning.’

Spanish Speaking Citizens’

what is proposition 103 s purpose
What Is Proposition103’s Purpose?

“The only general standard which

bears clearly on the issue of factor

weight ordering is the Proposition’s

stated aim of ‘protecting consumers

from arbitrary insurance rates

and practices’.”

Spanish Speaking Citizens’

what are arbitrary rates
What Are Arbitrary Rates?

Rates are arbitrary when they

do not have a substantial

relationship to the risk of loss.

inherently arbitrary
Inherently Arbitrary

“Pumping and tempering therefore

run counter to (the) requirement

that rating factors be substantially

related to the risk of loss.”

Spanish Speaking Citizens’

history of the regulations
History of the Regulations
  • Workshops in 2004 – 2005
  • Hearing on Feb. 24, 2006
  • Regulations revised on April 26, 2006
  • Regolutions adopted on July 14, 2006
  • Insurers file class plans and rates on

August 17, 2006

lawsuit on the regulations
Lawsuit on the Regulations

Basic Arguments:

  • the regulations violate Prop. 103

because they result in arbitrary rates

  • April 26th revision failed to comply

with procedures

  • No authority to order rate filings
history of lawsuit
History of Lawsuit
  • Lawsuit filed on July 18, 2006
  • Preliminary injunction denied

August 10, 2006

  • Motion for summary judgment

granted Feb. 15, 2007

future litigation
Future Litigation
  • Appeal of ruling on summary

judgment

  • An “as applied” challenge
where s the crisis
Where’s the crisis?
  • Two – year phase-in
  • 15% compliance
  • Rate cuts mask disloction
market changes could be looming
Market Changes CouldBe Looming

“Churn is underway. We’re seeing

more phone calls than we’ve seen

in two years (in Northern California).

It’s a mass migration of auto

insurance customers.”

David Nelson, Alliance of

Insurance Agents and Brokers

how can the regulations be improved
How Can the Regulations Be Improved?
  • Actuarial Standards of Practice
  • Improving the credibility of

mandatory factors

how can the regulations be improved1
How can the RegulationsBe Improved?

Driving record

  • ticket masking
  • three years
  • two-point offense

Mileage verification

  • driver estimates
  • default mileage