Insurance Industry’s Own Bill Clears Assembly Panel

A substitute bill to regulate insurance rates, which was drafted and promoted by the state’s leading insurance lobbyists, was approved Tuesday by the Assembly Finance and Insurance Committee, with six Republicans providing the decisive margin.

The bill, authored at lobbyist Clay Jackson’s request by state Senate Majority Leader Barry Keene (D-Benicia), is designed to counter a tougher rate regulation measure by Assemblyman Lloyd G. Connelly (D-Sacramento) and to head off an even tougher 1988 consumer initiative.

The six Republicans who, on the last vote call, put the bill over the top on a 12-5 vote were Ross Johnson of La Habra, Dennis Brown of Signal Hill, John R. Lewis of Orange, Larry Stirling of San Diego, Cathie Wright of Simi Valley and Phillip D. Wyman of Tehachapi. Most of the committee’s Democrats either voted no or did not vote.

Johnson, who appeared to have organized the Republican move, marking the first time GOP legislators had voted for any form of rate regulation, explained afterward:

“We wanted to keep some options available on the subject matter, leave some room to negotiate. We remain unhappy with the philosophy of rate regulation.”

There was immediate speculation, however, that the Republican votes for the bill meant that Gov. George Deukmejian may be prepared to sign at least a weak form of rate regulation this year, if it clears the Legislature.

Tuesday’s committee approval means the task of consolidating the Keene-lobbyists’ measure, the Connelly measure, and a bill to end the insurance industry’s state antitrust exemption by Assemblywoman Maxine Waters (D-Los Angeles) is left to the Assembly Ways and Means Committee, where all three bills are pending.

That committee is expected by legislative leaders to send to the Assembly floor, probably next week, a compromise bill that would, for the first time, bring California a measure of state regulation of insurance rates, but without the stringent provisions for public participation in the process that the consumer organizations want.

Assembly Speaker Willie Brown (D-San Francisco) has said he believes legislation of this kind could be enacted in both houses this year.

What specifically would be subject to regulation by the state Insurance Department would be any annual increases or decreases of more than 10% in personal lines of insurance, such as automobile or homeowners, or of more than 25% in commercial lines.

Before its passage Tuesday, the Keene-lobbyists’ measure was amended, on the motion of committee Chairman Patrick Johnston (D-Stockton), to change the limit in personal lines before rate regulation would be invoked from 20% in one year or 30% in two years down to the 10% limit set in the Connelly measure.

Consumer advocates and Connelly still argued, however, in testimony before the committee that the new bill was not only unnecessary but a step back in some respects from what the state has now.