Garamendi Orders Four Companies To Justify Homeowner Rates
By Associated Press - July 6, 2006SACRAMENTO (AP) _ Insurance Commissioner John Garamendi ordered four major insurers Wednesday to justify their homeowners and renters' insurance rates, saying he would order rate cuts if the charges were found to be too high.
Garamendi's office said it was the first time that a California insurance commissioner had ordered an insurance company to justify its rates.
Garamendi said a Department of Insurance study found that the four companies--State Farm, Allstate, Farmers and Safeco--paid out less than 50 cents of each premium dollar taken in last year to settle claims.
The four companies cover more than 4.1 million policyholders, 51 percent of the state's homeowners and renters' insurance market.
"These companies have very strong financial reserves," Garamendi said. "Therefore, they do not need to build surpluses by maintaining such extraordinarily low loss ratios. I will not allow the insurance industry to charge excessive rates at the expense of consumers."
Sam Sorich, president of the California Association of Insurance Companies, said the current rates were approved by Garamendi and that rate cuts could leave insurers unable to pay claims triggered by a major earthquake or other disaster.
"The true picture of whether rates match insurer losses and expenses can only be determined over a period of time, certainly more than one or two years," he said. "Data from the National Association of Insurance Commissioners does not show evidence of excessive gain."
A spokesman for Garamendi, Norman Williams, said department officials would begin gathering rate information from the four companies to submit to a state administrative law judge, which would hold a hearing on the issue and make a recommendation to Garamendi on whether to order a rate cut.
Garamendi could approve, reject or modify that recommendation.
If the companies disagree with his decision they could go to court. | 
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