Mercury Insurance is looking to raise rates on homeowners and renters insurance policies in California. The company has plans to raise rates by an average of 8.8% for some 300,000 consumers in the state. If state regulators approve the proposal, the company will be generating an additional $19 million per year in profits. Consumer Watchdog, a non-profit organization concerned with fairness for insurance consumers, claims that the proposal is unreasonable because the insurer is already awash with profit.
According to Consumer Watchdog, the company paid less than 50 cents on claims for every dollar it collected from premiums in 2010. The company was able to generate $152 million profit during that year. Consumer Watchdog is now pressuring California insurance regulators to require the insurer to make modification to its rate proposal. The organization recognizes the fact that the insurer must raise rates to remain competitive in the industry and account for risk from natural disasters, and suggests that the rates should be lowered to 5.8%.
The state has yet to rule one way or another. Regulators are currently investigating the matter and will likely determine whether changes need to be made to the proposal at some point next month. Mercury Insurance claims that the higher rates are necessary not only because of higher environmental risk and competition, but also because of the changing insurance and tax regulations coming from Congress.
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