Convinced of Crisis, Brown Urges Insurance Reforms

Assembly Speaker Willie Brown (D-San Francisco) said Tuesday that testimony in two lengthy insurance hearings he has conducted in the last several days has convinced him that there definitely is an insurance crisis and that the Legislature must adopt “significant reforms” in its 1987 session.

Brown, emphasizing his interest in insurance reform, said no Assembly Speaker in the history of California has ever before formed a select committee, served as its chairman and held statewide hearings on an issue, as he is doing in this case.

The Speaker said he believes that the Legislature will set restrictions on the percentage rate of premium increases that can be instituted by companies without state regulatory approval. Until now, there has been no rate review in California, a step also called for Tuesday by the California Trial Lawyers Assn.

Second, Brown said, he thinks that laws will be passed to increase the authority of parties to insure themselves or to create self-insurance pools.

Third, he said, the Legislature may mandate a state takeover of the assigned-risk plan in auto insurance, so as to assure greater availability of insurance to those who cannot obtain it from private companies. At present, the private companies serve as the board of directors of the assigned-risk plan, although its rates are subject to approval by the state insurance commissioner. There was testimony at Tuesday’s hearing that New Jersey has put the state in charge of assigned risk and that more than half the insurance policies sold in that state are through the assigned-risk category.

Brown said he felt that the Legislature made a serious mistake when it strengthened the state’s mandatory insurance law in 1985 without at the same time taking steps to assure that insurance would be available to everyone.

The strengthened mandatory law has been under a state Supreme Court-ordered suspension for nearly a year while a lawsuit challenging the state’s failure to do that is considered.

In its advocacy of state rate review Tuesday, the California Trial Lawyers Assn. recommended the establishment of a regulatory commission, including public members, that would regulate the cost of insurance in the state.

“The insurance industry’s strong profit motive is unhampered by any meaningful regulation,” said Browne Greene, the organization’s president-elect. “The industry’s profits for the first half of 1986 are already astronomical.”

Would Control Swings

Trial lawyer leaders said an insurance commission with the power to approve rates would eliminate or restrict the dramatic swings in the insurance market that have characterized pricing in recent years.

In another development Tuesday, state Insurance Commissioner Roxani Gillespie issued a directive to all California insurance sellers that as of Nov. 15 they must submit to her documentation justifying any annual aggregate premium rate increase of 25% or more in a commercial liability or commercial automobile policy.

She said she will review the documentations and rule within 60 days whether the increase is justifiable or not.

Gillespie had announced that she would take such a step at a Los Angeles hearing Aug. 26. What was new Tuesday was her announcement that a 25% rate increase will be the floor above which documentation will have to be provided.