Consumer Federation of America’s Study Comes Under Fire from AIA

Calling the Consumer Federation of America’s (CFA) study on state insurance regulation “poorly conceived” and “wrong headed,” the American Insurance Association (AIA) is urging CFA to retract their recent study on state insurance regulation titled “Why Not the Best? The Most Effective Auto Insurance Regulation in the Nation.”

According to the AIA, the paper by consumer activist Robert Hunter wrongly credits the passage of Proposition 103 for reducing auto rates in California and suggests California’s prior approval rating environment should be a model for other states.

David Snyder, AIA assistant general counsel emphasized that no credible evidence exists to support the idea that California’s auto market improved as a result of Prop. 103, which was never fully implemented.

The AIA stated that it has enjoyed a productive partnership with CFA on several important safety and consumer protection efforts including co-founding the Advocates for Highway Safety and the Coalition Against Insurance Fraud.

However Snyder stated the new study is not “indicative of CFA’s high standards and quality work products.” said Snyder. He added that he hopes the two organizations can work together to correct the report’s findings.

According to the AIA, the passage of Prop. 103 in 1988 was only one of a series of highway safety measures, court decisions, and fraud fighting efforts that impacted auto rates in California. These include stronger drunk driving laws and greater use of safety devices, such as seatbelts and airbags.

In addition, the AIA pointed out the study ignores the fact in that in 1988, the California Supreme Court overruled its 1979 Royal Globe decision that allowed third parties to sue insurers for bad faith, clearing the way for district attorneys and the industry to work aggressively to stamp out organized claim fraud. According to the AIA, as a result of the 1988 high court ruling together and the approval of Proposition 213 in the mid 1990’s, auto-related lawsuits fell from 91,000 in 1988-89 to 42,000 in 1998-99.

The AIA represents more than 370 major insurance companies that provide all lines of property and casualty insurance and write more than $77 billion annually in premiums. The association is headquartered in Washington, D.C. and has representatives in every state. All AIA press releases are available at www.aiadc.org.

Topics California Auto Legislation