4 Big Insurance Firms Take Issue With Warning of Higher Rates

An insurance industry campaign spokesman said Monday that if Propositions 100 and 103 win voter approval, the state’s auto insurance companies will send out new bills “as fast as they possibly could,” raising the rates of most policyholders outside Los Angeles and Orange counties.

But within hours of the statement, four of California’s five biggest car insurance sellers said they have no such intention, and the other company was noncommittal. The companies suggested that the campaign announcement is “premature.”

Leaders of the Propositions 100 and 103 campaigns, saying that actually their initiatives call for rollbacks of insurance rates, accused the industry campaign of extortionist tactics. They said no one will get a price increase if their measures pass.

The rapid-fire exchanges came at a time when the $43-million insurance industry campaign--the most expensive in the state’s history--has been conducting a television advertising blitz claiming that both Proposition 100 and Proposition 103 would raise rates in 54 of the state’s 58 counties, lowering them only in Los Angeles, Orange, San Francisco and Fresno.

‘Why . . the Rest of Us?’

The ads, which are running only outside the counties where the insurers concede that the rates would be lowered, state flatly that Propositions 100 and 103 “will raise auto insurance rates.”

Other lines in the ads include these: “L.A. has problems, but the rest of us shouldn’t have to pay for it.” “Why should we pay more so L.A. can pay less?” Or “Why should most drivers get a rate increase, just so drivers in L.A. can pay less?”

Industry campaigners justify the ads by saying that both Proposition 100, backed by a trial lawyer-consumer coalition, and Proposition 103, by consumer advocate Ralph Nader, would do away with the territorial rating system under which people in urban neighborhoods pay far more for auto coverage than those in rural and suburban areas.

Flattening the rates, they say, would entail price increases for most Californians and decreases only in heavily urbanized counties.

Both the Proposition 100 and 103 campaigns called news conferences Monday to attack that argument as false. Both insisted that their measures do not do away with the territorial rating system and they accused the insurers of trying to defeat them by spurious divide-and-conquer tactics, setting the rest of the state against Los Angeles.

In fact, both initiatives contain clauses that would at least reduce the use of territorial ratings as a factor in pricing insurance, making it less important than a driver’s record and other factors. Proposition 103 would allow the use of territorial ratings only if the insurance commissioner adopted regulations authorizing it.

Scott Carpenter, principal press spokesman for the industry campaign, asserted that it is so clear to the insurers that Propositions 100 and 103 would do away with territorial rating that the companies would be “compelled” to adjust their rates after the election.

Asked how fast, Carpenter said, “As fast as they possibly could.”

But checks with the five biggest Southland sellers--State Farm, Farmers, Allstate, the Automobile Club of Southern California and 20th Century--found considerable disagreement with Carpenter.

“There has been no talk here about sending out new bills,” a spokeswoman for the Auto Club said. “It’s sort of ridiculous for the campaign to come out with something like that, because nobody knows for sure.”

Rick Dinon, vice president of corporate relations for 20th Century, said his firm has no such plans either. “I don’t think that any individual company is going to really know what the law of the land is until it is given guidance by the counsel representing its interest, the Department of Insurance and other regulatory and legal bodies,” he said.

Pete Ingham, executive vice president and general counsel of State Farm, said, “We have not made any decision.”

Jeff Byers, a spokesman for Farmers, said that before his company decided what to do, it would need guidance on what the initiatives really mean.

Spokesmen for Allstate were noncommittal.

Meanwhile, the chairman of the Proposition 100 campaign, Steven Miller, said the industry campaign “clearly is engaged in a strategy employing scare tactics that may or may not be supported by the companies.

“I’d discount the company statements,” he said. “But what is clear is that there is at least an implied threat of extortion on the part of the insurance industry, that unless the voters go the insurance companies’ way, they’re going to make the public pay. And the California public should not stand for it.”