No-Fault Insurance Could Boost Some Rates, Agents Told

Assertions in a closed meeting of insurance agents by the head of an agents group that the industry’s no-fault initiative would result in a rate boost of 35% for some drivers are embarrassing the industry in the battle over auto insurance initiatives.

A transcript of remarks by Donald R. Stewart, executive director of the American Agents Alliance and a no-fault supporter, is being circulated by two groups opposed to no-fault that obtained a tape recording of what Stewart said. They say it shows that no-fault is a sham, as far as guaranteeing a rate cut.

‘Stingy’ Discounts

Stewart, speaking March 14 to about 20 agents at Spenger’s restaurant in Berkeley, declared that even though many policyholders would get discounts under no-fault, on the whole, the discounts are “stingy,” there is no guarantee that any specific individual will get a reduction and the industry will be able to recoup revenue losses.

Since an account of his remarks appeared June 13 in the Los Angeles Daily Journal, a legal newspaper, Stewart has recanted some of what he said.

He said this week that he has been persuaded by an Allstate insurance actuary, made available to him by the no-fault campaign, that Los Angeles residents he had said would get a 35% rate increase actually would get a 29% decrease.

But Stewart repeated that since the no-fault initiative is only committed to a statewide average decrease, which will vary from one place to another, there is really no way of knowing how much any particular policyholder may pay if the initiative becomes law.

Stewart said that had he known he was being tape-recorded, “I might have been a little more careful in how I said things.”

The tape was given to the Ralph Nader-backed Voter Revolt to Cut Insurance Rates by Farmers agent Frank Thomas of Hayward, who made the recording. A copy was also obtained and transcribed by the California Trial Lawyers Assn. Thomas said he supports the Voter Revolt campaign.

Stewart did not challenge the tape’s authenticity.

In the tape, Stewart is heard saying that the no-fault initiative is vulnerable to attack because “it guarantees no cost savings.”

The insurers who drafted the initiative “decided that this whole reduction is going to be done on average statewide,” he explained.

“So you can’t tell your customer . . . ‘You’re going to get a 16-point reduction or an 18-point or whatever,” he said. “Because it’s on average and they may not like Oakland as well as they like Yreka, and the company may take their deductions wherever they want to take them.”

Becomes Effective

Furthermore, he said, since the initiative only becomes effective the day of the election, the insurers “can say very honestly, ‘It doesn’t mean a thing, folks.’ ”

“The company can change their rates the day before the election. After all, what’s the track record we are looking at already? These rates are bouncing up every time we turn around,” he said.

Stewart said he supported no-fault because the alternative initiatives would financially damage both insurance companies and agents. The no-fault initiative, he said, protects the industry, because it is “skimpy in the discounts . . . (has) this average pay-out . . . (and a) delayed date” of implementation.

“Any one of these would give the companies adequate protection against the unforeseen,” he said.

During his talk, unaware he was being taped, Stewart remarked: “We do have to be careful we don’t print things that fall into good merchandising stuff for (opponents’) ads, that they can reprint out of our memos. . . . That’s why we can’t say some of these things (publicly).”

In an interview this week, he said that with his new understanding based on what the Allstate actuary told him, he no longer regards the discounts as stingy but remains concerned about the other vulnerabilities he mentioned.

Short-Term Effects

George Tye, a spokesman for the no-fault campaign, said Stewart had made “some unfortunate statements.” Tye said he is certain policyholders will not be disappointed with the discounts they receive, remarking, “If the public is dissatisfied with the short- or long-term effects of no-fault, we’re going to pay for it (with future initiative campaigns). We must make sure the public is satisfied.”

Harvey Rosenfield, a coordinator of the Voter Revolt campaign, said Stewart’s retractions about policyholder increases if no-fault passes should not be accepted.

“We finally have figures from inside their secret meetings, rather than what they put out to the public,” he said. “They can’t get out of them now.”