Calif. Regulators Highlight Consumer Protection in Report

California regulators issued an annual report this month detailing their activities in 2011, highlighting the tens of millions saved for the state and its consumers through rate reductions, fines and repayments from examinations of insurers and restitution payments from criminal investigations.

In the 18 months since January 2011, the CDI processed 1,500 property/casualty rate filings, of which regulators approved rate reductions to auto coverage by about $132 million. The report did not state how many of the auto insurance rate filings resulted in premium increases.

The report focused on the 2010-11 fiscal year, when the California Department of Insurance (CDI) had a budget of about $204 million.

A large chunk of that budget went into fighting insurance-related criminality, with $91.7 million going to statewide and local assistance in such matters. About 46 percent of the total revenue for the CDI was related to fraud investigations.

A chunk of the investigations came from grant-funded programs looking into auto-related cases.

The Urban Grant Program, created more than a decade ago, investigates “organized criminal activity that occurs in urban areas” that often includes staged accidents and phony claims.

“These cases result in artificially higher insurance premiums for core urban areas and low-income areas of the state than for other areas of California,” the report stated. “Only a focused, coordinated effort by all appropriate agencies and organizations can effectively deal with this problem.”

The CDI also was part of an interdiction effort with district attorney’s offices in 10 counties. That effort produced 263 convictions, according to the report.

Low Cost Auto Insurance Program a Major Focus

The CDI’s California Low Cost Automobile Insurance Program (CLCA) saw expansion and enhancements last year. The state-backed program offers cut-rate coverage to low-income motorists who want to purchase California auto insurance.

With 103 outreach events and meetings related to CLCA, it was the most publicized program out of all those that saw outreach efforts from the CDI.

The CDI aggressively expanded the program last year, establishing a new website that now accepts debit and credit cards and conducted publicity campaigns that included advertising on buses, at gas stations and through cell phone texts.

Regulators also decreased the annual premium for CLCA, amounting to savings of up to 9 percent and 4 percent on average. The price reduction was the largest since 2009. Currently, the average statewide cost of a CLCA policy is between $231 and $434.

The program continues to help low-income and uninsured drivers, according to the report, with 85 percent of policies issued in 2011 going to applicants whose household income was at or below $20,000 annually. Also, 59 percent of new policies went to applicants who had lacked coverage before joining CLCA.

By the end of last year, CLCA had almost 9,800 active policies, according to the latest annual CLCA report. In 2010, lawmakers extended the program by five years.

Regulators Report Complaint Figures

Auto-related complaints ranked a close second to complaints related to health coverage, making up 33 percent of total complaints; health insurance-related complaints made up 35 percent.

Complaints about auto coverage haven’t been at the top of the list since 2006, when it held sizable margins over health coverage-related complaints.

Claim denials again led the pack in the types of complaints the DOI received in 2011, making up 26 percent of all complaints. Claim denials have consistently been the most cited reason for complaints, making up about 1 out of every 4 complaints since 2006.

The next highest single complaint reasons were dissatisfaction with settlement offers and delays in claims service, making up 13 and 11 percent of complaints, respectively.

In addition, the CDI’s Market Conduct Division (MCD), which is responsible for leading scheduled examinations of insurers based on the number of complaints, fielded almost 30,000 total complaints in 2011. Of those complaints that led to exams, auto-related complaints led all other lines of business with 11,589 complaints, making auto insurers a priority for review.

“The lines of business most impacted by complaints, and the insurers that generated the most complaints within those lines of business, are prioritized for examination by the” MCD, the report stated.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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