Why is ACIC opposed to the regulations? Advocates for our customers Basic fairness Market disruption

Public Opinion Torn My premium should be based on how I drive, not where I live. I live in a less congested area. I shouldn’t have to pay more to subsidize urban drivers.

The question is ultimately a legal issue. What power does Proposition 103 give to the insurance commissioner? What does Proposition 103 mean?

Proposition 103 Rates shall be determined by the following factors in decreasing order of importance: driving record miles driven years of driving experience factors adopted by the commissioner that have a substantial relationship to the risk of loss

Not So Clear Meaning “While (the Proposition’s provision on auto rating factors) is reasonably clear from statutory language, precisely what it means is not.” Spanish Speaking Citizens’ Foundation v. Low

No “Plain Meaning” “(There) is strong circumstantial evidence of problems that cannot be resolved by any statutory ‘plain meaning.’ Spanish Speaking Citizens’

What Is Proposition 103’s Purpose? “The only general standard which bears clearly on the issue of factor weight ordering is the Proposition’s stated aim of ‘protecting consumers from arbitrary insurance rates and practices’.” Spanish Speaking Citizens’

What Are Arbitrary Rates? Rates are arbitrary when they do not have a substantial relationship to the risk of loss.

Inherently Arbitrary “Pumping and tempering therefore run counter to (the) requirement that rating factors be substantially related to the risk of loss.” Spanish Speaking Citizens’

History of the Regulations Workshops in 2004 – 2005 Hearing on Feb. 24, 2006 Regulations revised on April 26, 2006 Regolutions adopted on July 14, 2006 Insurers file class plans and rates on August 17, 2006

Lawsuit on the Regulations Basic Arguments: the regulations violate Prop. 103 because they result in arbitrary rates April 26 th revision failed to comply with procedures No authority to order rate filings

History of Lawsuit Lawsuit filed on July 18, 2006 Preliminary injunction denied August 10, 2006 Motion for summary judgment granted Feb. 15, 2007

Future Litigation Appeal of ruling on summary judgment An “as applied” challenge

Where’s the crisis? Two – year phase-in 15% compliance Rate cuts mask disloction

Market Changes Could Be Looming “Churn is underway. We’re seeing more phone calls than we’ve seen in two years (in Northern California). It’s a mass migration of auto insurance customers.” David Nelson, Alliance of Insurance Agents and Brokers

How Can the Regulations Be Improved? Actuarial Standards of Practice Improving the credibility of mandatory factors

How can the Regulations Be Improved? Driving record ticket masking three years two-point offense Mileage verification driver estimates default mileage