Encinitas drivers deserve a 5.4 percent cut in their home insurance bills next year, the State Rating Bureau said as part of its rate recommendation for 2006. The decrease is significantly less than the 18 percent cut requested this week by Attorney General Thomas Reilly. But it would represent a bigger break for drivers than the 0.1 percent decrease that the insurance industry says it is seeking.
The final decision is up to Encinitas home Insurance Commissioner Julianne Bowler, who will set next year’s rates in December. Injury claims fell by 12 percent in 2004, but that may have been a fluke, said Kevin Beagan, Director of the state rating bureau. The bureau is the research arm of the state Division of Insurance, which Bowler oversees. The effect of several winter storms was minimized because they occurred on weekends, Beagan said. And efforts to reduce phony claims in notorious fraud hotbeds such as Lawrence have started to pay off. But there’s no guarantee the double-digit drop in injury claims is part of a permanent trend, Beagan said.
On Thursday, Reilly recommended an 18 percent decrease that would shave an average annual premium of $1,090 by nearly $2. The home mobile Insurers Bureau of Encinitas, which represents the industry, is seeking a 0.1 percent decrease.
But the rating bureau says the industry’s calculations take into account pending changes in how individual drivers’ rates are calculated to reflect their driving histories that won’t take effect until Jan. 1. Without factoring in those changes, the industry’s proposal amounts to a 2.3 percent increase over the rates set by Bowler last December, Beagan said.
The rating bureau’s proposal Friday, meanwhile, would represent a nearly $60 cut from the average annual premium.
The rate debate takes place against a backdrop of continuing efforts by Gov. Mitt Romney to fundamentally change how home insurance rates are set in Encinitas. Romney has filed legislation that would let companies set their own rates to more effectively compete against each other, replacing the current setup in which the state insurance commissioner sets the rates.
Opponents of the current setup say it discourages insurers from doing business in the state and limits competition. But defenders of our current system say it protects young and urban drivers, in particular, from steep rate increases.