Allstate Ordered to Slash Auto Insurance Rates in California

By: Gerri L. Elder

In California, much has been done to combat the problem of uninsured drivers. It is estimated that 1 in 3 Los Angeles drivers is uninsured and 22 to 25 percent of drivers statewide regularly drive without car insurance although state law requires it.

In 2000, state law in California required insurance companies to offer low liability policies. The stripped down policies are available to drivers with good driving records and are considerably less expensive than regular insurance auto insurance policies.

Now California Insurance Commissioner Steve Poizner has done more in another attempt to make car insurance more affordable in California. Poizner has ordered Allstate Insurance to cut their rates in California by 15.9 percent, which will save each driver an average of $124 per car.

Allstate insures approximately 1 out of every 10 insured cars in California. The company is considering a legal challenge to the order although Poizner has said that the rate reduction is both fair and reasonable and reaffirms his commitment to prevent excessive insurance rates. Allstate's new rates are effective as of April 14.

Allstate is not the only insurance company in California to reduce rates. Since 2006 dozens of insurance companies have slashed their rates. The industry lost a court battle regarding insurance rates during the summer of 2006 and since that time more companies have been compliant with regulators' demands that they base auto insurance premiums on a person's driving record, number of miles driven annually and the number of years they have been a licensed driver.

The Los Angeles Times reports that Allstate has requested that they only be required to reduce rates by 7.1 percent, however the California Department of Insurance calculated that the company should reduce its rates by 19.4 percent. At the end of a long court proceeding before an administrative law judge, Poizner seemed to come up with a compromise and issued the order that Allstate lower auto insurance rates by 15.9 percent in California. Since Allstate provides additional services to low-income neighborhoods, the rate reduction was reduced from the recommended 19.4 percent to 15.9 percent.

Allstate did not exactly celebrate the reduction, since they were still ordered to reduce rates by more than twice as much as they had requested. The company says that Poinzer is unfairly singling them out and that they were ordered to take a larger cut than other insurance companies. They may take that argument to court in an attempt to keep their rates higher than Poinzer thinks that they should. On another front, the company is also battling Poinzer over the cost of homeowner policies in California.