State Resists 50% Boost in Assigned-Risk

State Insurance Commissioner Roxani Gillespie said Thursday that while a decision by her department on a proposed 50% increase in rates for assigned-risk auto insurance is still weeks away, it is “obvious that we’re not going to give them anything like what they’re asking for.”

Gillespie spoke out during the last of two public hearings on the increase requested by the plan’s governing board, which insists that assigned-risk drivers are not paying their own way under present rates and, in fact, are being subsidized by regular auto insurance buyers.

Under the assigned-risk plan, drivers who cannot buy liability coverage from private companies, either because they are considered too risky or because insurance is not readily available in their neighborhoods, are assigned to the private insurers in proportion to each firm’s share of the total auto insurance business in the state. More than 300,000 drivers pass through the California assigned-risk system each year, although at any single time there are about 240,000 drivers in it.

Gillespie’s statement about trimming the proposed rate increase came shortly after she had sharply questioned representatives of state Atty. Gen. John K. Van de Kamp, who appeared at the hearing to challenge the size of the increase.

J. Robert Hunter, head of the National Insurance Consumer Organization of Alexandria, Va., and an expert brought in by the attorney general to testify on his behalf, said that an 11.3% increase would be appropriate. He contended that the full proposed increase would allow the industry “an excessive 30% return--nearly three times the average rate of return for American business.”

Insurance industry representatives at the hearing challenged him, saying that even with the full increase, assigned-risk policies would not be profitable for the private companies.

Gillespie, an appointee of the Republican Deukmejian Administration, asked why Van de Kamp, a Democrat who has been interesting himself recently in insurance issues, would want to go to an out-of-state expert, known to be a critic of the insurance industry, for such testimony, rather than to an independent California insurance actuary.

She also questioned whether, after his intervention in the assigned-risk matter, Van de Kamp could adequately represent the Insurance Department as its attorney should it be sued over its decision on assigned-risk rates.

“I hope this doesn’t raise clouds over the attorney-client privilege,” she said.

While saying she planned to cut back on the rate increase, Gillespie did not say whether she agreed with the 11.3% advocated by Van de Kamp’s expert.

The attorney general was not present at the hearing, but later, in a telephone interview, he said that in selecting Hunter to testify he was choosing a nationally respected authority on the subject and this was preferable to choosing a less knowledgeable Californian just because he was a Californian.

As for Gillespie’s suggestion that the attorney general’s office might no longer be able to represent the Insurance Department in assigned-risk matters, Van de Kamp said he was convinced that nothing said at the hearing by his representatives would preclude such representation in the future.