Car Insurance Man Tells of Being Pressured to Redline

The vice chairman of the new consumer advisory panel in the state Department of Insurance, a Beverly Hills insurance agent, said at the group’s meeting Wednesday that “special agents” of several companies had told him not to write auto policies for South Los Angeles residents.

Leroy Mobley, one of 11 members of the new panel, said he had been warned, “If you don’t get your (clients’) losses down, we’ll get rid of you.” He said the warning meant that the companies would no longer allow him to sell insurance on their behalf unless he adhered to the restrictions they laid down.

“There are written rules and unwritten rules in the insurance business,” Mobley said. “The unwritten rules are delivered by special agents sent out by the companies.”

In making what amounted to an allegation that several companies practice blatant redlining, refusing to sell auto insurance to certain parts of the Los Angeles community, Mobley did not name the companies whose agents he said had conveyed the message. Richard Irmas, a Beverly Hills insurance broker who is also a member of the advisory panel, told the meeting that the practice of conveying unwritten rules of policy writing to which Mobley referred is fairly universal in the insurance community.

Two insurance industry spokesmen who were asked for comment later said, however, that they questioned whether such a restriction would have been enunciated in the field of automobile insurance.

California spokesman for the Insurance Information Institute, John McCann, said there are “a set of unpublished underwriting rules” in many companies and that occasionally company representatives convey to independent agents such as Mobley a notice to cut off issuing certain kinds of insurance when a “PML” has been reached in a certain area. He said PML stands for “Probable Maximum Loss,” meaning that companies estimate they can afford to take no more losses in that area.

McCann said this might occur in earthquake insurance, but added that he doubted if it would occur in auto insurance.

Another industry spokesman, George Watts of the Western Insurance Information Service, said he questioned Mobley’s account because “I haven’t heard of that happening before” in the automobile field.

Mobley, Irmas and other members of the consumer advisory panel, however, insisted that insurance availability is a major problem in South Los Angeles and other parts of the inner city.

The chief of consumer affairs in the Department of Insurance, Everett Brookhart, was present when Mobley made his remarks, but he did not comment on them.

However, a short time later, discussing the problem of the uninsured driver in South Los Angeles, he displayed a departmental study showing that at the end of 1984 only about 65,000 of the 190,000 registered motor vehicles in the Insurance Department’s Territory 10 (downtown and South Los Angeles) were insured.

Brookhart said some of the uninsured vehicles were insured when a tougher state mandatory insurance law went into effect in July, 1985. But five months later the law was suspended pending a State Supreme Court hearing on its validity, and it has been suspended for nearly six months.

Mobley said that even those South Los Angeles residents who are insured have trouble getting timely service when they have claims, because most agents and insurance claims centers are well outside the area. The difficulty of getting service is what prompts some of them to sue, he said.

Later, the advisory panel named independent trucker Mary Saied of Van Nuys, as its chairperson, and she selected Mobley as vice chairman.

The panel also voted to send a letter to legislators now considering the Department of Insurance’s budget for the next fiscal year to urge that it be increased to permit more consumer services.

Brookhart and Insurance Commissioner Bruce Bunner, who came to the three-hour meeting for the last hour, said the department has been discussing with legislators a special $206,000 appropriation to install toll-free complaint lines and provide more personnel to respond to consumer complaints.