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Associated Press
Sep 01, 2004

by State & Local Wires

State Farm plans to reduce rates for California customers

LOS ANGELES -- California's largest insurer of auto policies said it will lower its rates by an average of 7.6 percent effective Oct. 1, a move that could force more carriers to follow suit.

State Farm said Tuesday that 2.7 million customers would save about $215 million a year when the cuts become effective. The agency credited the rate cuts to lower claim costs and staff reductions.

The last time the insurer reduced its auto-policy rate was in 1999. A State Farm spokesman couldn't say how much someone would save under the average 7.6 percent rate decrease because policies vary.

Advocacy groups applauded the reduction, saying it is in line with auto-reform regulation and follows a national trend in which insurers are vying to offer more competitive rates.

"If the company had not reduced its rates ... it could have been challenged for charging customers too much," said Douglas Heller, executive director of Foundation for Taxpayer and Consumer Rights in Santa Monica.

Industry experts also expect a wave of reductions by State Farm competitors. The Auto Club of Southern California last month cut its rates by an average of 5 percent for its customers, or by $45 per insured car.

"When a firm the magnitude of State Farm cuts rates, it puts pressure on other companies to lower prices too," said Bob Hunter, insurance director for the Consumer Federation of America, a Washington, D.C., watchdog group.

Last year, the average cost for auto insurance rose $29 a year to $871 nationally, according to the Insurance Information Institute.

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