When Proposition 103 was passed by California voters back in 1988, the promise of reduced insurance rates was widely welcomed. With insurers needing to seek prior permission from the California Department of Insurance (CDI) prior to putting rate changes into force, the increased role of the CDI in consumer insurance matters was perceived to be largely positive.
With the spend on motor insurance in California dropping in the period 1989 to 2010 when every other state saw an increase over the same period, it’s worth looking at whether this is the full picture. Over that 21 year period, there was a 43% increase in spend on motor insurance by Americans (source: National Association of Insurance Commissioners). However, it’s worth noting that the average motor insurance spend per year by Californians is almost $50 less on average than in other states.
As the only state to have a decline in car insurance spend, there’s considerable debate as to whether Proposition 103 is behind the fall, or whether increased road safety, technological developments in the motoring industry, and seat belt usage have encouraged lower premiums through a decrease in claims. The Association of California Insurance Companies has also stated that although the original intention of Proposition 103 might have been to make comprehensive insurance coverage more affordable for safe drivers, the hidden cost is in the increase in lawsuits.
The argument continues to rage on; whilst rigid oversight of the insurance industry in the state might help Californians enjoy considerably reduced motoring insurance premiums, the question has to be raised as to whether a healthy, competitive industry has been stifled instead, giving consumers less choice, and fewer offers.