The California Department of Insurance (“DOI”) has sent insurance companies in California a notice reminding them that, under Proposition 103, their rates must not be excessive, inadequate, or unfairly discriminatory.

The DOI observed that the recent revision to the federal income tax law for 2018 reduced the corporate tax rate from 35 percent to 21 percent. As a result, some insurers whose rates were based on the 35 percent corporate tax rate “may now be charging excessive rates.” The notice reminded insurance companies with excessive rates of their obligation to file a rate change application with the DOI to ensure they are complying with Proposition 103.

“I am working to make sure insurance companies are not taking advantage of their policyholders,” said Insurance Commissioner Dave Jones. “In California insurer profits are limited under Proposition 103, therefore the savings they realize from the tax reductions should result in those savings being passed on to policyholders through lower premiums.”