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3rd Major Auto Insurer Will Raise Its Rates

February 11, 1988

A leading Northern California auto insurer said Wednesday that it will increase its rates for its 1 million policyholders by an average of 15.6% in March, becoming the third major insurer to announce sizable rate hikes since Dec. 30.

The California State Automobile Assn., which serves 45 counties in the northern and central part of the state, is the counterpart of the Automobile Club of Southern California, which just last month instituted an average 12.5% rate hike for its 700,000 policyholders.

State Farm, the state's leading seller of auto insurance, implemented an average 7.9% hike on Dec. 30, its first general increase since 1985.

In all three cases, company spokesmen Wednesday attributed the increases--which come at a time when petitions for a number of proposed insurance ballot initiatives are being circulated among the state's electorate--to higher claims costs.

They denied published reports that losses in the stock market last year had anything to do with the increases.

A spokesman for the California State Automobile Assn., Tom Rohner, said that in 1987 his company had experienced a 5% increase in claims frequency and a 24% increase in cost per claim. "We're seeing some major problem areas in bodily injury liability, medical payments and uninsured and under-insured motorist areas," he said.

Art Watkins, communications manager for the Automobile Club of Southern California, said of his company's January increases, "The reason was the cost of repairing human beings, repairing automobiles and added lawsuits. The bulk of the increase is in uninsured motorist and bodily injury."

John Krizek, a Southern California spokesman for State Farm, said the firm's "underwriting experience," meaning its claims losses, were responsible for its increase.

Stanley Zax, president of the Assn. of California Insurance Cos., said this week that even after income from investments on their deposits, the state's auto insurers had lost a total of $1.3 billion last year. Such estimates, however, have been challenged by some consumer groups.

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