Speaker Trip to London Stirs Up Insurance Issue

Times Staff Writer

An insurance trade group is planning to fly Assembly Speaker Willie Brown and several other legislators to England this month to visit Lloyd's of London and learn from an industry perspective the reasons for the growing insurance crisis in California.

The trip, scheduled for the Legislature's Easter vacation, has upset consumer organizations that have backed legislation that would tighten the state's regulation of the insurance industry. While agreeing that Lloyd's, the big London-based insurance exchange, plays a crucial role in the availability of certain types of insurance in California, the consumer groups complain that the trip gives the industry an extraordinary opportunity to lobby a legislative issue without the presence of the public.

"It's another opportunity by the industry to get the legislators indoctrinated to their point of view," said Steven Miller, executive director of the newly formed Insurance Consumer Action Network, one of several groups working with Brown and other legislators to cut rates and make liability insurance more widely available. "It sure is frustrating."

Trip Called Worthwhile

But an executive of the Assn. of California Insurance Companies, the trade group that is sponsoring the trip, insists that the trip will be worthwhile, giving the lawmakers a chance to learn first-hand about the complex issue of reinsurance.

Basically, reinsurance is the process by which American insurance companies insure themselves against excessive losses by taking out policies with other companies. American insurance companies depend heavily on overseas syndicates such as Lloyd's for the coverage. The decisions made abroad on reinsurance affect the availability of insurance at home.

"We don't think we can (explain reinsurance) in a legislative hearing, where minds are focused all over the place," said George Tye, executive manager of the association, which represents 40 insurance companies.

Tye noted that the insurance industry finds itself on the defensive in the Legislature this year, with more than 30 bills proposing various changes, including several backed by Speaker Brown (D-San Francisco), who has made the issue one of his top legislative priorities.

"We'd like to explain to these guys that if you squeeze down on one part of the insurance industry because of a perceived problem, that you'll cause a problem somewhere else," Tye said. "It's like a balloon."

The insurance industry long has argued for restricting damages that individuals can recover in liability cases and supports a June ballot proposition that would do so. On the other hand, Brown and the California trial lawyers have consistently fought such proposals.

Brown announced Tuesday that he and other legislators were going on the London trip. Despite the large number of insurance bills introduced this year, Brown observed: "I'm convinced that too few of us know anything about insurance to be (doing) anything other than stump speeches." He promised a comprehensive set of proposals in two to three weeks.

On Wednesday, Brown's press secretary, Susan Jetton, said that the Speaker and Assembly Democratic Leader Mike Roos of Los Angeles would be the only two Assembly members to go to the London conference. Brown plans to travel to Italy after the London session at his own expense, Jetton said.

According to Tye, five senators along with Roos and Brown will fly first class to London. He refused to name the senators and said that the list is still not final. Accompanying the legislators will be Tye, industry lobbyist Clayton Jackson and five insurance company executives. The party will stay at the London Marriott, where discounted corporate room rates are about $175 a night.

Events include a Sunday dinner with insurance brokers at the Savoy Hotel and an all-day session with underwriters from Lloyd's on Monday.

'Not a Junket'

On Tuesday, the delegation will have time for sightseeing, but Tye insisted that the plan is for "a substantive trip, not a junket, not a boondoggle." Legislators who want to bring along spouses or friends will have to pay the added expense, Tye said.

Carl Oshiro, an attorney for the Consumers Union, agreed that there is a need for legislators to learn more about insurance issues, but he added: "I don't know if they need to go to London to do it." Representatives of Lloyd's have testified before other state legislatures, he said.

"Lloyd's of London is obviously doing this to create a favorable impression in the minds of the legislators that the actions that (insurers) are taking are reasonable and there is no need for supervision by government agencies," Oshiro said.

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