Allstate issued a statement on Thursday saying it wants to lower auto insurance rates in California, but the proposed rate reduction is neither fair nor reasonable.
Allstate was ordered to make those cuts under Proposition 103, which passed 20 years ago. It's one of the toughest insurance reform measures in the nation and has saved California drivers billions of dollars according to a new study.
According to this study, $60 billion worth of savings can all be tracked back to the voter-approved Proposition 103.
Auto insurance rates around the country have skyrocketed while California rates have merely inched up. That's the finding of a new study issued on Thursday. So, why did this happen? The Consumer Federation of America says it's because of Proposition 103.
"Rates have been held down, the best performance in the country. A 12.9 percent rate increase over the past 20 years, compared to well over 50 percent for the rest of the country," said Bob Hunter, from Consumer Federation of America.
Voter-approved Proposition 103 addresses costs, profits and even salaries of highly paid insurance executives.
Still, the industry says Proposition 103 is just a small reason for the big consumer savings.
"Will Prop 103 have an impact? I'm sure it has some impact as well, but again when you look at improvement in safety features of vehicles, going from shoulder harnesses to anti-lock breaks, to air bags to side air bags. Has all helped make vehicles safer," said Tully Lehman, from the Insurance Information Network.
Those reasons along with a hyper competitive market, the industry says, is why in large part rate increases are so much lower in the Golden State.
Consumer advocates in California have a different take.
"You can take on the biggest industry in this country and you can win," said Harvey Rosenfield, from ConsumerWatchDog.org.
Rosenfield was the driving force behind Proposition 103. He says under Proposition 103 insurance companies get a fair return and consumers get a fair price.
"Regulation of rates, stringent regulation of rates, is the only way to protect consumers and results in lower automotive insurance premiums," said Rosenfield.
And according to Thursday's study, regulation has worked out for the insurance companies, too.
"Their profits are better than the industry. Over the past 10 years their profits have been 10.1 percent, where as in the nation it has only been 8.1 percent. So California profits, even with those low rate increases, have been better than average," said Hunter.
There is now a move in Washington to move regulation away from California and instead let Congress regulate the industry. Consumer activists say that could possibly do away with all the Proposition 103 savings.
