L.A. Leads in Assigned Risk Auto Insurance
More Los Angeles motorists are being forced into the expensive, assigned risk system through their inability to find an auto insurer willing to sell to them than in any other large California city, a state Insurance Department report says.
In Los Angeles, 17.14% of all insured vehicles were carried under the assigned risk program, according to the department’s figures for 1986, the latest year available, as compared to .33% in Sacramento and .47% in San Diego.
Under the system, people unable to find a willing insurer buy through the California Automobile Assigned Risk Plan, which parcels the policies out among auto insurers in proportion to the companies’ percentage of the total statewide business.
The assigned risk policies are the only ones whose premium rates require the approval of the state insurance commissioner.
The percentage of assignedrisk-insured vehicles in other California cities surveyed was .6% in Fresno, .78% in San Jose, 2.16% in Santa Ana, 2.38% in Anaheim, 3.88% in Oakland, 5.76% in Long Beach and 5.96% in San Francisco.
Insurance Commissioner Roxani Gillespie said Tuesday that she fears the high Los Angeles figures portend a collapse of the voluntary auto insurance sales market in Los Angeles, where insurers are beset by extraordinarily high and frequent claims and many more lawsuits than elsewhere in the state.
In this event, she said, the assigned risk system would be responsible for insuring many more drivers than it does now, and the end result could be much wider state control over the auto insurance market.
Already, many companies are refusing to voluntarily do business in the higher-accident-risk areas of Los Angeles, leaving customers few alternatives to going into the assigned risk system if they are to be insured at all.
Gillespie again reiterated opposition to proposals that the Insurance Department be required to approve all auto insurance rates, and particularly that it be encouraged to develop a flat rate, putting an end to the current territorial rating system under which those living in high-accident-prone neighborhoods are charged the most.
She said the result of flat rates in other states has been that private insurers more and more are willing to sell only in low-accident areas, thus avoiding the claims losses endemic in the high-accident areas.
Under flat rates, the companies’ policies are far more profitable in the low-risk areas than they are in the high-risk ones. Under territorial rating, the companies are compensated by higher premiums for taking on the higher-risk drivers.
Gillespie and the Deukmejian Administration have long supported the insurance industry in its defense of territorial rating. Its critics usually come from inner-city urban areas where the system works in such a way as to charge the poor the highest insurance rates.
Gillespie said that in New York and New Jersey, where state insurance agencies charged with setting rates are subject to heavy political influence to even them out, the net result has been that a much higher percentage of insurance buyers are unable to find a company willing to sell to them and must buy in the assigned risk system.
The California assigned risk percentage, statewide in 1986 was only 3.1%. But in New York, it was 14.7% and in New Jersey 42.8%
Gillespie said the New Jersey system, which includes a state joint underwriting authority and many public components, is currently running a $2-billion deficit, is poorly staffed and pays claims very slowly.