Insurance: Green auto insurance: pay by the mile

A new state-regulated insurance program aimed at incentivizing people to drive less could equate to taking about 10 million cars off the road during the next decade, according to an Environmental Defense Fund report released with regulations on the new program.

California Insurance Commissioner Steve Poizner announced the pay-as-you-drive auto insurance program in late summer, taking language from a bill created by Assemblyman Jared Huffman, D-San Rafael. Mr. Huffman decided not to send the bill to the governor earlier this year after working with the commissioner on a regulatory approach.

The green-minded regulations, which are currently under public review, would require auto insurers to adjust premiums according to driven miles for policyholders who opt to participate in the program.

The pay-as-you-drive policy will be verified through odometer readings, auto repair records or a mileage counting device, but are not meant to include any kind of GPS tracking device. Once the regulations take effect no later than fall next year, insurers can offer the product to consumers.

The Defense Fund study looked at a similar regulation tested in Texas and estimated the program could save California about 5.5 billion gallons of gasoline and about $40 billion in car-related expenses between 2009 and 2020. Another study by the Brookings Institute projected potential savings of about $270 per year, per household.

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State Compensation Insurance Fund, a quasi-public workers’ comp carrier currently undergoing massive reform, appointed five new executives this month in an effort to improve transparency and oversight.

Last year, State Fund’s president and vice president were removed after allegations of fraud, and the state began proceedings to help overhaul the company.

New President Janet Frank worked closely with government leaders to craft reform legislation during the past year that will include expanding the board from five to 11 voting members.

Recent appointments include Harrison Jerome, chief operating officer promoted from vice president of information technology; Carol Newman, general counsel; Doug Stewart, chief risk officer; Jay Stewart, chief financial officer; and Rebecca Wanta, chief information officer.

Ms. Frank said a sixth executive will be named sometime in the next few weeks. State Fund is one of California’s largest workers’ comp insurers with about $2.3 billion in premium volume in 2007.

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Health Net of California will return about $25 million in coverage after the California Department of Insurance said the company inappropriately revoked policies for close to 1,000 payers in 2004.

The bill includes about $14.2 million in medical charges incurred by rescinded policyholders, $3.6 million in penalties and $7.2 million in waived insurance premiums.

The commissioner said Health Net was co-operative in the settlement and hopes that other carriers will take the proceedings as a model for revising their rescission practices. The group agreed to make significant changes to its underwriting process and agent training, including the addition of a third-party review process for future rescission decisions.

The department has a similar case filed in collaboration with the Department of Managed Health Care that could result in a settlement of about $650 million to $1.3 billion in response to rescission complaints against PacifiCare.

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ABD Insurance Services executive James Settles resigned from the Wells Fargo subsidiary last month after 12 years with the company.

Mark Stokes, managing director for the company’s Petaluma, Santa Rosa and San Francisco offices, said six-year ABD manager John Fradelizio will assume most of the responsibilities of the former employee benefits managing director.

“Nothing has really changed. We have a strong leadership team, and John is a familiar face in the community,” Mr. Stokes said.

Mr. Settles is now North Bay benefits practice leader for Woodruff-Sawyer & Company out of San Francisco.

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The longtime partners of Hodges & Russell Insurance have split their office after the two decided to grow their agencies independently.

David Hodges said the two were always independent but decided to move to different locations Aug. 1 after both needed room for growth. Now Hodges Insurance Services, the practice added two producers and is in the process of rebuilding its Web site.

Mr. Hodges said he also plans to add benefit risk management services to all plans and possibly new agents or a new office. Charles Russell also plans to grow his business and recently recruited his daughter to the business.

Hodges & Russell Insurance Services was the ninth-largest brokerage in the North Bay according to the 2008 Business Journal Book of Lists with premium volumes of about $30.5 million.

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Submit items for this column to Ashley Furness at 707-521-4257. afurness@busjrnl.com or fax 707-521-5292.