However, thanks to litigation and non-profit organizations such as the Foundation for Taxpayer and Consumer Rights, consumers are getting their money back.
In 1988, Californians fought back against excessive auto, homeowner and business insurance premiums and other abuses by insurance companies. At the helm was Harvey Rosenfield, founder of the non-profit, non-partisan organization Foundation for Taxpayer and Consumer Rights: he wrote Proposition 103 - the law that the insurance companies are now accused of violating.
Proposition 103 was passed despite an $80 million campaign by the insurance industry to defeat it. "It requires refunds, rollbacks and rate regulation of the insurance industry," says Rosenfield. "It also bans insurance companies from considering whether an applicant for auto insurance has previously been insured."
Incredibly, these companies made it difficult for some people to even buy insurance. In so doing, they actually forced people to drive uninsured. Not only were young people affected - people in the armed forces who left California suffered. (Because they served overseas, there was a lapse in coverage and the insurance company's policy stated that, if you were away from the state for a certain amount of time, they considered you not previously insured.) People who moved to California from another state were overcharged; people who had previously used public transport and didn't need a car were overcharged. All these people were punished for absolutely no reason.
Rosenfield points out that most people who were overcharged were unaware that they paid more. "It is almost impossible for a consumer to tell that the price they pay for premiums included the illegal surcharge," says Rosenfield.
Questions to Harvey Rosenfield
How can the consumer find out if there has been an overcharge by the auto insurer?
HR:They need to contact a lawyer or our foundation. We will review their policy and attempt to determine if this illegal surcharge was hidden in the policy. People can potentially get back, through lawsuits, hundreds of dollars.
How long have you been filing lawsuits?
HR:Since 1995. This means that consumers may be eligible for monies owed since 1995 but only through this litigation will we be able to get this money back.
Have many consumers contacted you?
HR:I have had a lot of complaints but the vast majority of victims are unaware that they were overcharged. In other words, if you fall into any of the above descriptions, you may be eligible for compensation.
How were the insurance companies able to overcharge in the first place?
HR:One insurance company was so desperate to evade [the lawsuit that we are part of] that they got the California legislature to pass a bill in Sacramento legalizing their surcharges. But they cannot do that under proposition 103.
So how was the bill passed?
HR:Mercury Insurance company alone showered lawmakers with nearly $1 million in campaign contributions in order to pass that bill but the courts reviewed the legislation and threw it out. The legislature does not have the authority to rewrite a voter-approved law.
In February, 2007, a Sacramento Superior Court judge ruled in favor for consumers and the Insurance Commissioner in a lawsuit filed by the insurance industry challenging new state regulations benefiting good drivers.
The new regulations require insurers to base auto insurance premiums primarily on policyholders' driving records rather than their ZIP code, marital status, or other factors such as those described above.
The original petition in support of the new regulations was filed by The Foundation for Taxpayer and Consumer Rights, several other not-for-profit organizations and community leaders throughout California including city attorneys in San Francisco and Los Angeles.
Insurance companies spent $80 million in their campaign to defeat the proposition, but on election day, the voters approved Proposition 103, which forced insurance companies to refund over $1.2 billion dollars to Californians and has blocked over $23 billion in automobile insurance rate increases since 1988.
If you have had similar issues with Safeco Insurance submit your complaint to [Foundation for Taxpayer and Consumer Rights]