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NEWS RELEASE
Sep 17, 2003


CONTACT: Doug Heller - 310-392-0522 x309

Prop. 103 Blocks 10% Homeowners Insurance Rate Hike By State's 4th Largest Insurer; Saves Consumers $26 Million

Northern Cal. AAA Agrees to Keep Homeowner Premiums Unchanged After Consumer Group Challenge
A proposed 10% homeowners insurance rate hike by CSAA (Northern California's branch of AAA) has been stopped after the California Department of Insurance and the Foundation for Taxpayer and Consumer Rights (FTCR) objected to the proposal. The rate increase would have raised CSAA premiums by $26.3 million and affected the companies' 330,000 policyholders. CSAA has agreed to maintain current rates for 2004, rather than face a regulatory hearing requested by FTCR in order to justify the 10% increase, in accordance with the state's insurance laws established by Proposition 103.

"CSAA wanted rate hikes that it did not need," said FTCR's senior consumer advocate Douglas Heller. "The company will have enough money to pay claims and earn a fair profit, without forcing homeowners to pay higher premiums. Thanks to California's Proposition 103, we are able to intervene and stop skyrocketing premiums."

Proposition 103, which was enacted by voters in 1988, requires the insurance commissioner to scrutinize insurance rate changes before allowing insurers to alter rates, a system known as "prior approval." Prop 103 also allows consumer groups such as FTCR to intervene and challenge rate hikes.

After reviewing the proposed rate hike plan, FTCR determined that CSAA, which has been allowed to increase rates by 26% in the past two years, had gone too far and would not be able to justify the proposal when placed under the microscope of Prop 103's regulatory review. On August 18, 2003, FTCR requested a hearing on the rate hike, but today the group withdrew that request in response to CSAA's agreement not to raise rates.

FTCR recently challenged a 19.7% rate hike on homeowners insured by Safeco, which the company subsequently withdrew and then re-filed. FTCR expects to continue its challenge to that increase and will challenge other companies' that propose excessive rate hikes.

"The insurance commissioner must continue to block unfair rate hikes and insurance companies must recognize that they cannot expect to propose increase after increase without a rebellion from consumers," said Heller.

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