Department puts insurers on notice for excessive rates with new tax savings
News: 2018 Press Release
SACRAMENTO, Calif. — Insurance companies writing in California were sent a Notice today reminding them that under Proposition 103 their rates must not be excessive, inadequate, or unfairly discriminatory.
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.
Led by Insurance Commissioner Ricardo Lara, the California Department of Insurance is the consumer protection agency for the nation's largest insurance marketplace and safeguards all of the state’s consumers by fairly regulating the insurance industry. Under the Commissioner’s direction, the Department uses its authority to protect Californians from insurance rates that are excessive, inadequate, or unfairly discriminatory, oversee insurer solvency to pay claims, set standards for agents and broker licensing, perform market conduct reviews of insurance companies, resolve consumer complaints, and investigate and prosecute insurance fraud. Consumers are urged to call 1-800-927-4357 with any questions or contact us at www.insurance.ca.gov via webform or online chat. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.