Department puts insurers on notice for excessive rates with new tax savings
News: 2018 Press Release
The recent revision to the Federal Tax Schedule for 2018 reduced the corporate tax rate from 35 percent to 21 percent. As a result some insurers, whose rates were based on the 35 percent corporate tax rate may now be charging excessive rates. In California the prior approval process that applies to property and casualty insurance rates limits insurer profits and rates. The Notice reminds insurance companies with excessive rates that they are obligated to file a rate change application with the department to ensure they are complying with Proposition 103.
"I am working to make sure insurance companies are not taking advantage of their policyholders," said Insurance Commissioner Dave Jones. "In California insurer profits are limited under Proposition 103, therefore the savings they realize from the tax reductions should result in those savings being passed on to policyholders through lower premiums."
In January, Commissioner Jones directed the department to commence a regulatory review of insurers' rates due to the federal corporate tax rate cuts. The commissioner also modified the Prior-Approval Rate Making Regulations to properly reflect the change in tax savings from the corporate tax rate cuts.
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.