More on Excessive Profits

I wrote over the weekend about Allstate's excessive profits in Texas and the refund ordered by the Texas Department of Insurance. Not to be outdone, California's Department of Insurance has announced they are starting an investigation into insurance companies excessive profits.

Coincidence? Probably not. A bit of politics? Probably. Good for consumers? Definitely.  Let me explain.

It is probably not a coincidence that insurance companies are making excessive profits in various parts of the country, if not in the entire country. Rates are set and, despite monitoring, you don't know how profits will be until they are announced. Rates are part of the equation, but costs, including claim payments, are the other part of the equation. If claim payments go down, insurance companies make more money. Rates should then, in turn, decrease.

This is probably a bit of politics since our insurance commissioner is running for a new office. But, in the end, it doesn't matter since this is good for consumers. Lower rates, more competition and more regulation are all good things.