Bill on Car Insurance Rates Clears Panel
The state Assembly’s Insurance Committee on Tuesday approved with only one vote to spare a broad auto insurance bill that for the first time calls for rate savings based on sacrifices from both the insurers and the trial lawyers.
The bill, authored by the committee chairman, Patrick Johnston (D-Stockton), combines selected rate rollbacks and rate regulation with legal reforms.
But various provisions were opposed by both of the major lobbying groups, and even Johnston expressed doubt that his bill could win the votes necessary for approval by the full Assembly.
Under the bill:
- Premiums of private passenger auto policies currently in force would be reduced by 10% from their Jan. 1, 1988, levels.
- There would be further reductions of another 10% for drivers who had no more than one moving violation in the last three years.
- These rollbacks would be paid for by two legal changes. One would change “collateral sources rules” by preventing policyholders from collecting from two different insurance companies for the same damage. And general damages, for pain and suffering, would be eliminated from the uninsured motorist portions of policies.
- A rate regulation mechanism would be implemented under which all annual increases of more than 10% for personal lines of auto insurance would have to be approved by the state Insurance Department.
- Minimum liability coverage levels required under the state’s mandatory auto insurance law would be cut roughly in half, to $7,500 for individuals, $15,000 for incidents involving multiple parties and $3,000 in property damage. Policies of this kind would cost 25% less than the old required $15,000/$30,000/$5,000 limits.
- A four-month arbitration procedure would be established for all cases involving damage claimstotaling less than $50,000, which constitute more than 90% of all accidents, with strong incentives for both parties to agree to arbitration.
In testimony before the Johnston committee, insurance industry representatives criticized the legislative package on grounds that the legal changes were not enough to finance the rate rollbacks, while trial lawyers’ representatives particularly criticized the cut in minimum liability coverage.
Representatives of the lobbies said privately, however, they were not too concerned, because they feel it is unlikely the Johnston proposal can get the votes on the Assembly floor, where neither bills construed to be unfavorable to the insurers or the trial lawyers have been able to command a majority thus far.
Johnston did not quarrel with this assessment Tuesday. In fact, he said, he understands that talks are going forward on broadening a proposed no-fault bill, perhaps by including some rate regulation, to get more Democratic support in the Assembly for this alternative approach.
He said he still feels that the biggest push on the Assembly floor for insurance legislation may come from the “Gang of Five” dissident Democratic coalition pushing this concept, rather than for his own bill, which is more objectionable to the insurers and less objectionable to the trial lawyers.
Johnston’s bill won an 11-4 majority in the insurance committee, with 11 votes required for passage, and now goes to the Ways and Means Committee for assessment of its fiscal impact.
