State Farm to cut
isle insurance rates

Rate reductions would apply
to auto and home insurance policies

By Rick Daysog
Star-Bulletin

The state's largest auto insurer today said it plans to reduce rates by 15.2 percent and return another $11.6 million in premiums to its customers.

State Farm Insurance Co. also announced that it has filed with the state for a 13.2 percent rate decrease for homeowners policies. The decrease translates into a savings of about $320 a year per homeowner. State Farm has about 80,600 homeowners policies in Hawaii.

For residents who have both auto and homeowners insurance with State Farm, the combined savings are equal to about $600 a year, the company said.

State Farm said that the 15.2 percent auto rate reduction, filed with the state Insurance Division, could mean savings of $18.1 million for its 119,000 local auto insurance customers.

The insurer also said that the one-time $11.6 million dividend, which will be distributed over the next six months, is equivalent to 20 percent of auto insurance policyholders' six-month premiums.

The move comes as local insurance companies, which have enjoyed record profits during the past two years, are under considerable pressure by the Cayetano administration to lower auto rates.

Allstate Insurance Co., the state's third largest auto insurer, and Dai-Tokyo Royal State Insurance Co., a smaller insurer, announced during the past month that they were cutting premiums.

"I think this is a good day for consumers all over the state," state Insurance Commissioner Rey Graulty said today.

Gary Methner, State Farm's regional vice president, said the cost of auto insurance claims in Hawaii has gone down in recent years, reversing the losses suffered by local insurers during the late 1980s and early 1990s.

Methner stressed that the lower rates do not reflect changes in the state's no-fault auto insurance law which go into affect Jan. 1. Earlier this year, state Legislators overhauled the state's no-fault auto insurance law that mandated insurers to roll back premiums between 24 percent and 30 percent.

Some insurers have complained that the new law will increase average premiums, not lower them.

State Farm said its proposed rate reduction is its second in less than a year. In February, the auto insurers cut rates by 2 percent, lowering local customers' insurance bills by $2.4 million.

Since 1993, State Farm has returned $31.6 million in dividends to its local consumers. In 1994, the company mailed out dividend checks totaling $9.3 million and in 1993, it returned $10.7 million.

The Hawaii dividends are part of a national program in which State Farm's mutual company and its New Jersey affiliate, State Farm Indemnity Co., will return $692.3 million in 30 states and the District of Columbia.

Of the 30 states, State Farm drivers in Hawaii and Alaska enjoyed the highest proportional dividend payout, followed by Illinois policyholders. As in Hawaii, State Farm will pay dividends amounting to 20 percent of Alaskan drivers' six-month premiums. For Illinois customers, the dividend payout amounts to about 16.1 percent of their half-year premiums.