Geico customers in California will get a 10.7 percent break on their car insurance rates starting Aug. 15.
California Insurance Commissioner Dave Jones announced the premium cut July 22, based on a rate filing approved by the state June 2. The new rates will impact 714,433 policyholders and save customers statewide an average $127 a year. Los Angeles area residents will save an average $238 a year.
Origin of the car insurance rate cut
Under California's Proposition 103, which was passed in 1988, car and home insurance companies must get approval for premium hikes from the state's insurance commissioner.
Originally Geico requested a 4 percent rate hike, but Consumer Watchdog challenged the increase. Following a review by the California Department of Insurance, Geico re-filed its application, requesting an 8.5 percent decrease. In June, the insurer agreed to a 10.7 percent rate reduction. The cut will save customers $91 million a year, California Insurance Commissioner Dave Jones said.
"This kind of turnaround is exactly why Proposition 103 gave consumers the right to challenge proposed insurance rates," Todd M. Foreman, Consumer Watchdog staff attorney, said in a statement.
The law, which the consumer group championed, saved California drivers more than $62 billion on their auto insurance from its passage through 2006, according to a 2008 study by the Consumer Federation of America.
Consumer Watchdog is now advocating pending state legislation that would give the California insurance commissioner the authority to reject unreasonable health insurance premium hikes. Although the state insurance department can review health insurance rates, it has no power to stop them from going into effect.
Geico's rate drop is the latest among several in California this year, including a 14.9 percent cut in home insurance rates by USAA Insurance.