Car Insurance Bills’ Rough Ride--Assembly Panel Kills 1, Balks at 2nd

The Assembly Finance and Insurance Committee, demonstrating the Legislature’s apparent reluctance to go along with proposed wide-ranging changes in the insurance laws, Tuesday killed one such bill for the year and reacted with decided skepticism to another.

A bill by Assemblyman Richard Polanco (D-Los Angeles) that would have created a state-operated auto insurance company to sell policies providing the minimum liability coverage required by California law drew support from only four members of the 21-member committee and finally was sent out to “interim study.” It cannot come up again until next year.

An hour later, a bill by Assemblyman Lloyd G. Connelly (D-Sacramento) that would require the state Insurance Department to approve any personal insurance rates that are raised or lowered at any one time by more than 10% or any commercial rates that change by more than 25% was given a cool reception, with committee Chairman Patrick Johnston (D-Stockton) questioning whether it would really work to prevent unpopular rate increases.

Indeed, Johnston suggested, it might conceivably keep the consumer from benefiting from decreases since it would require the Insurance Department to intervene in cases where rates were decreased by more than the limits.

The supporters of the measure, which include many consumers groups and Atty. Gen. John K. Van de Kamp, decided not to ask for a vote on it for another two weeks.

Some of them expressed hope that Assembly Speaker Willie Brown (D-San Francisco) would endorse the bill during that time, thus ensuring a more favorable reaction to it from the committee. But a Brown aide, who asked not to be identified, said this is problematical.

There were several hours of debate on the two measures, with the insurance lobby offering witnesses from as far away as Chicago to testify against them and a large number of consumer advocates appearing in favor of them.

In an unusual appearance by a working journalist, Tom Vacar--a consumer affairs reporter for KCBS television in Los Angeles--gave two impassioned speeches to the committee, calling on it to pass both the Polanco and Connelly bills. Vacar brought to the committee room boxes of what he said were 25,000 letters from KCBS viewers calling for insurance reform.

Johnston interrupted the second speech to say that he hoped that Vacar, at least, would be balanced in his coverage when he was on the air.

‘Call a Cop’

The most impassioned moment, however, came when Michael Votichenko of the Citizens Action League, a consumers lobby, suggested that the committee was loath to act for change because so many of its members get substantial campaign contributions from the insurance industry. Assemblyman Ross Johnson (R-La Habra) exploded in anger, shouting that he was insulted and telling Votichenko, “If you think somebody’s a crook, call a cop.”

The Polanco bill was the first legislative effort to put the state of California into the insurance business, as has been done in several Canadian provinces. But unlike the Canadian systems, which are state monopolies in which driver participation is compulsory, the California company would have to compete with the private insurance industry.

Polanco estimated savings under his plan, compared to private insurance coverage, at 22% to 26%. However, a battery of insurance industry witnesses insisted that the plan would not be financially viable and eventually would have to be subsidized by the taxpayers because the $2 one-time license fee provided for would not fully support the program.

They argued that since it would be voluntary, the state company would be stuck with insuring the worst risks at medium rates, while the private companies would be left free to sell to the best risks at lower rates.

Opposed by Agencies

Officials of both the state Insurance Department and the state Compensation Insurance Board, representing the Deukmejian Administration, testified in opposition to the bill.

Afterward, Polanco vowed to persevere, saying he will be back next year with a bill that might be revised to provide the minimum liability required under state law at standard rates. If drivers wanted more than the required minimums, as well as comprehensive and collision coverage, they could then buy it from the private companies.

Polanco said that if the Legislature will not go along with the plan next year, he may seek to qualify it as a ballot initiative.