December 11, 1996
EXPECTED REDUCTION OF AUTOMOBILE RATES IN RESPONSE TO PROPOSITION 213
TO: All Insurers Licensed to Transact Private Passenger Automobile Insurance or Commercial Automobile Insurance in the State of California.
RE: Automobile Insurers are Expected to Reflect Reduction of Their Rates in Response to Proposition 213 in the Submission of Their RH-338 Auto Rate Class Plan.
On November 5, 1996, the voters of the State of California passed Proposition 213 which restricted the eligibility of certain California drivers to recover certain types of damages from insured drivers, even if the insured driver is at fault. One of the specific restrictions under Proposition 213 is that uninsured motorists will no longer be eligible to collect non-economic damages for their injuries.
Accordingly, under Proposition 213 automobile insurers will no longer be required to pay certain types of damage claims for which the insurers were liable before the passage of Proposition 213. For example, automobile insurers will no longer be required to pay for non-economic damages to uninsured motorists who are injured due to the negligence of insured drivers. This will necessarily result in a reduction in liability losses and loss adjustment expense to automobile insurers.
Insurance Code Section 1861.05 states in part:
No rate shall be approved or remain in effect which is excessive, inadequate, unfairly discriminatory or otherwise in violation of this chapter.
Accordingly, pursuant to the prohibition against excessive rates in Insurance Code Section 1861.05, all automobile insurers are hereby on notice that they must reduce their automobile liability rates to reflect the reduction in liability exposure associated with Proposition 213. We are requesting that this be done in conjunction with the submission of your new auto rating class plan due no later than February 18, 1997. Further, the insurers must make the required rate and class plan filings associated with the rate changes as set forth above.
Any questions regarding this bulletin can be addressed to:
Brian G. Soublet
California Department of Insurance
45 Fremont Street, 21st floor
San Francisco, CA 94105