State orders Mercury to cut rates
SACRAMENTO — State regulators have ordered Mercury General Corp. to cut its homeowners insurance rates by 8.2%, instead of the increase in premiums that the company had sought.
As a result, the Los Angeles insurer is contesting the ruling in court.
The rate cut was announced by California Insurance Commissioner Dave Jones.
“The rate reduction provided for in this decision would offer much-needed financial relief for homeowners and would no doubt help consumers keep more of their hard-earned dollars in today’s tight economy,” Jones said in a statement Tuesday.
After holding a public hearing, Jones approved a decision by a state administrative law judge to reject a 7.3% increase proposed by Mercury. And the judge recommended the 8.2% decrease.
Jones used his powers to declare Mercury’s request for a rate hike as “excessive” and, instead, he ordered the rate reduction.
Last month, Jones reached an agreement with State Farm, California’s biggest homeowners insurer, to drop its rates by an average of 12.6% for more than 1 million policyholders in the state beginning April 15.
In legal filings, Mercury argued that its “homeowners premiums are among the lowest in the state.” What’s more, Jones relied on outdated data and “incorrect legal and factual conclusions” in ordering the rate reduction, the filings said.
A 1988 voter-approved law, Proposition 103, requires the commissioner’s approval or rejection of all property and casualty insurance rates.
Mercury is suing the commissioner in Sacramento County Superior Court to stop him from ordering rate reductions totaling $16.5 million for 270,000 California homeowners policyholders.
“I have directed the Department of Insurance to vigorously defend against Mercury’s effort to deprive homeowners of this rate decrease,” Jones said.
Consumer Watchdog, an advocacy group that opposed Mercury’s original request, said that the insurance company had “ample opportunity to justify its requested rate hike” but failed to persuade the judge and commissioner.