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Jan 09, 2008 - 12:00 PM
CONTACT: Doug Heller, (310) 392-0522 ext. 309
Schwarzenegger Insurance Tax Unfair to Homeowners, Lets Insurers Off the Hook;
Insurance Interests Have Donated $3.8 Million To Schwarzenegger's Political Funds, Would Reap Benefit of PlanSanta Monica, CA -- Governor Schwarzenegger's proposal to add a 1.25% tax on homeowners and business property insurance policies unfairly forces California consumers to fill Sacramento's budget gap, while letting Schwarzenegger's insurance company donors escape any burden. Consumer advocates, who are currently challenging several companies' excessive homeowner insurance rates, said this tax on policyholders should be rejected by lawmakers and the Insurance Commissioner.
"The Governor's attempt to add an insurance tax on consumers while letting insurance companies off the hook smacks of special interest favoritism and will raise insurance premiums for California homeowners and businesses," said Douglas Heller, Executive Director of The Foundation for Taxpayer and Consumer Rights (FTCR). "Shared responsibility does not mean making average Californians pay while the Governor's insurance company donors' just deliver the check to Sacramento."
Insurance companies have contributed $3.8 million to Governor Schwarzenegger's campaigns. A portion of the policyholder tax would reportedly fund certain regional firefighting needs. While insurance customers around the state will be forced to pick up the tab for these efforts, the insurance companies will presumably reap the financial benefit, through fewer claims and lower wildfire payouts. If insurance companies are going to save money as a result of this program, they should be responsible for paying the tax, advocates said.
Schwarzenegger's Homeowners' Insurance Tax is Unfair; Treats Similar Families Differently
The proposed 1.25% homeowners insurance tax would unfairly distribute the tax burden, FTCR said, as the following examples using the Department of Insurance premium comparison site demonstrate:
* A homeowner who buys a $250,000 policy in Culver City, California from Nationwide Insurance would pay more than twice the insurance tax that their neighbor with AAA pays for the same coverage. They'd pay about 400% more in taxes if they are insured by Century National;
* A State Farm customer living in South Central will pay about 30% more homeowners insurance tax than State Farm customers buying the same coverage in nearby Palos Verdes;
* Californians who choose to purchase earthquake insurance will pay a double tax compared with residents who forego an earthquake policy; and,
* Homeowners who pay more as a result of the insurance industry's insidious "Use It and Lose It" practice of charging more to customers if they file a claim will also have to pick up more of the state's tax burden.
"Fair taxation requires that people get treated according to a consistent and equitable system, but Governor Schwarzenegger's plan says that two families with the same income, purchasing the same product must pay different amounts. It's shocking that this plan made it out of the 'bad ideas' file," said Heller.
Homeowners Already Paying Too Much; Group Challenging High Home Insurance Rate Plans by Allstate, Farmers, Fireman's Fund, GeoVera
FTCR will contest a 13.7% homeowners insurance rate hike proposed by Allstate at a Department of Insurance hearing next week. The group says that Allstate is trying to illegally boost profits by overcharging California customers in violation of the 1988 voter-approved insurance reform measure Proposition 103. According to FTCR's data, Allstate customers should receive a 30% cut, for an average savings of $374 per policyholder. At the same time, the group is also challenging a proposed homeowners rate hike by Farmers Insurance, earthquake insurance rates charged by Geo Vera Insurance and both the homeowner and earthquake rates at Fireman's Fund. All told, FTCR estimates that the four insurance companies want to overcharge Californians by nearly $650 million.
"The Governor shouldn't force a new tax on consumers as another giveaway to the insurance industry that is already overcharging California homeowners by hundreds of millions of dollars a year," said Heller.
Using Prop 103, FTCR has helped Californians save more than $800 million by challenging other companies' auto, homeowners, and medical malpractice insurance rate proposals since 2003. A full list of these savings is available here.
FTCR is investigating whether the Governor's proposed homeowners' tax violates Proposition 103's prohibition on unapproved insurance rate hikes.
Group Says Proposal Raises Questions About Role of Schwarzenegger's Deputy, a Former Insurance Lobbyist
FTCR noted that Governor Schwarzenegger's Deputy Chief of Staff was apparently involved in the development of this proposal. Dunmoyer was the insurance industry's top lobbyist in California before leaving to work for the Governor. FTCR said that Dunmoyer's involvement in the development of this plan to make homeowners pay a tax that would help insurance companies is more evidence of the undue influence insurers wield in the Governor's office.
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FTCR is California's leading public interest watchdog. For more information, visit us on the web at www.ConsumerWatchdog.org.
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