Boiling Point

Mention automobile insurance rates, and the average Los Angeles automobile owner will boil over like a leaky radiator.

As Times writer Kenneth Reich noted in a recent series of articles, one reason for boiling is that the present insurance system with its high and rising rates and basic inequities suits nearly everybody except the driving and paying public.

Lawyers are happy with it, the insurance companies would not have it any other way, plaintiffs who win big judgments have no complaints, and legislators cannot be unhappy about the contributions that pour in from pressure groups.

And, because insurance these days is so highly political, Reich concludes that nothing about the system is likely to change as long as the interest groups of lawyers and insurance companies can paralyze the Legislature any time a member starts moving a bill proposing the most modest change to make insurance payments more just.

For example, California has a relatively new law making insurance coverage mandatory. It is not being enforced, because it is being challenged before the Supreme Court on the ground that it is unfair to poor car owners. To make it less unfair, Assembly Speaker Willie Brown (D-San Francisco) proposed a law this year to make available a bare-bones insurance policy that would cover economic losses but not big awards for pain and suffering and would cost maybe $400 a year. The trial lawyers fought it and it died, even with the sponsorship of the “powerful” Speaker.

Industry officials calculate that automobile insurance rates have increased about 40% in recent years, but in very uneven ways. A policy that protects a car owner against physical and economic loss in an accident in parts of Northern California can be had for $350; the same policy in East and South Los Angeles costs $2,000. One result is that increasing numbers of Southern Californians drive without insurance--as many as 70% in East and South Los Angeles, and perhaps as many as 2.5 million statewide.

But so far there is an argument against every plan to cure that. Why not charge everybody the same price for insurance? Because that would mean raising insurance rates for people who don’t live in high-risk areas, and no politician has the stomach for that. Even if the rates were flattened out, as one insurance specialist pointed out to Reich, insurance companies probably could not resist keeping in force higher-priced policies in low-risk areas and canceling the lower-priced policies in high-risk areas.

Presumably that is just good business and sharp arithmetic. But there is other arithmetic that insurance companies, regulators and trial lawyers should not ignore. In a recent poll of Californians, 65% of the sample said that the structure of insurance rates is unfair, and 85% said that rates are too high. In a state in which an automobile is so essential to holding down most jobs and where the initiative process is so easily available to people with a grievance, the insurance companies, the lawyers and the politicians should keep a sharp eye on what high insurance rates do to the California car owner’s economic pressure gauge. Once it starts boiling over, there is no telling what kind of remedies will be imposed or what they would do to the cozy world of the interest groups that like things just the way they are.