California auto insurance rates defy upward trend

WASHINGTON -- While Californians are getting squeezed by electricity costs, they are getting the best deal in the country on car insurance because of a unique state law, a consumer group says.

Auto insurance prices in California declined 4 percent between 1989 and 1998, while jumping an average 38.9 percent nationwide, according to a survey released Wednesday by Consumer Federation of America.

Insurance premiums have increased the most in Nebraska (up 81.7 percent from 1989 to 1998), South Dakota (75.2 percent), West Virginia (65.8 percent), Kentucky (64.3 percent) and Arkansas (61.5 percent), the survey shows.

They have increased the least in New Hampshire (up 2 percent), Pennsylvania (11.7 percent), Massachusetts (12 percent), Maine (13.2 percent) and New Jersey (15.8 percent).

Consumers nationwide spend an annual average of more than $700 per vehicle and $1,500 per household, totaling $100 billion nationwide, according to Consumer Federation.

California was the only state that showed a decline. At a news conference, Ralph Nader and other consumer advocates credited Proposition 103, passed by the state's voters in 1988.

Proposition 103, among other things, required insurance companies to open their books to justify rate increases, gave drivers with clean records a 20 percent discount, allowed banks to sell auto insurance to stimulate competition, and required the state commissioner to provide consumers with rate comparisons.

An insurance industry official denounced Proposition 103 as "government price-fixing" and instead attributed the decline in California's rates to improved highway safety and greater seat belt use, a crackdown on insurance fraud, and legal changes making it more difficult and expensive to file lawsuits in car accidents.

Insurance premiums around the country have declined since 1998 after several years of increases, for those same reasons, said David Snyder, assistant general counsel of the American Insurance Association.

Robert Hunter, director of insurance for Consumer Federation, said state-by-state figures were not available for years after 1998.

Consumer Federation and other groups, including Consumers Union, the Center for Economic Justice and the Foundation for Taxpayer and Consumer Rights, are asking state insurance commissioners to consider adopting a California-style law.