CALIFORNIA BILL WOULD LIMIT CAR INSURERS' PROFITS TO 5 PERCENT

CALIFORNIA BILL WOULD LIMIT CAR INSURERS' PROFITS TO 5 PERCENT

Despite insurance firms' objections, an Assembly committee Tuesday approved a bill that would limit car insurance underwriting profits to 5 percent.

The Finance and Insurance Committee voted 12-2 to send AB4325 by Assemblyman Tom Bane, D-Van Nuys, to the Ways and Means Committee.The bill would require companies that sell car insurance to report their profits on the underwriting only of car insurance to the state Insurance Department and to limit thoseprofits to 5 percent. The limit would not apply to profits from investments.

Rep. Bane said the public does not understand why car insurance rates keep going up and needs to have the information about how much profit firms are making. He said the industry should not oppose the bill because it claims firms are losing money on underwriting or making profits of 1 percent or 2 percent.

A 5 percent profit limit is certainly not onerous, Rep. Bane said.

Rep. Bane said the Legislature needs to take some simple action such as his bill before tackling more complex reform proposals such as limiting liability lawsuits or regulating rates.

Unless we do something about auto insurance and make it understandable to the public, they (firms) are not going to be in the private enterprise business very much longer because of proposed bills and initiatives.

Right now, all the public thinks is greedy insurance companies are ripping them off, he added.

Assemblyman Dennis Brown, R-Long Beach, an opponent, noted that passage of this bill would not have any effect on rates.

Rep. Bane agreed, saying, unless they (insurance firms) are lying to us about their lack of profitability.

But the insurance industry opposed the bill, saying no other industry has its profits limited.

It is our hope that at some point profit will improve, perhaps with a different system of insurance, said Tom Bone of the American Insurance Association. The industry is backing an initiative that would institute no- fault car insurance.

The insurance industry is very cyclical. In some years, profits are down. In some years, it is going to be up, he added.