Coastal Insurance Co. Intends to Stop Writing Auto Policies, Official Says

Coastal Insurance Co.--whose affiliates, FGS and Public Insurance Service serve 250,000 California auto insurance customers, 80% of them in Southern California--announced Thursday that it is getting out of the auto insurance business in April, 1989.

The companies, which are controlled by Harry O. Miller, who has contributed nearly $4 million to Proposition 101 on the Nov. 8 ballot, are sending non-renewal notices to all their auto customers this week, according to Steven Avgeris, a corporate officer.

The notices say the companies have “made arrangements with another carrier to offer you auto insurance.” But Avgeris said the other company will not be identified until the end of the year.

Avgeris said the decision to quit selling auto insurance was being taken “from a business point of view” and had nothing to do with the outcome of the insurance initiative fight. He would not elaborate on the precise reasons other than vaguely referring to the “business climate” for auto insurance in California.

He said Miller would continue to support Proposition 101, which calls for a 50% rollback in rates charged for the bodily injury component of auto insurance policies in exchange for limiting the ability of claimants to recover damages from auto insurers. Proposition 101 is one of five insurance measures on the Nov. 8 ballot.

But, Avgeris said, even if Proposition 101, which has been trailing in most recent polls, were to pass, Coastal, FGS and Public Insurance Service still will leave the auto insurance business.

Despite Avgeris’ disclaimer of any connection of the decision with the initiative campaign, there was a quick suggestion from two of the other campaigns that there is such a connection.

Carmen Gonzalez, press secretary for Proposition 103, the initiative supported by consumer advocate Ralph Nader, said:

“I find it very hard to believe it’s not related to the initiatives. It’s very curious that someone who has spent several million dollars supporting an initiative which would profit his own company announces several weeks before the election his departure from the auto insurance business.

“I won’t believe it, until we see it in April, 1989,” Gonzalez added. “And second, I think it’s an admission of Proposition 101’s departure from the field, an admission that it’s dead.”

The chairman of the Proposition 100 campaign, Steven Miller, said: “This is a sleazy and desperate attempt to confuse and frighten (insurance) policyholders and voters to do nothing against the insurance companies in the November election.” Proposition 100 is supported by the California Trial Lawyers Assn., Atty. Gen. John K. Van de Kamp and various consumer groups.

Avgeris responded: “That’s nonsense. Companies make business decisions unrelated to political propositions. They are based on considerations of profit and future profit.”

A representative of the campaign for the insurance industry’s no-fault initiative, Proposition 104, had no immediate comment on the Coastal Insurance announcement.

Coastal Insurance and its affiliates for the most part have sold auto policies on a monthly basis to high-risk drivers. Their chief executive officer, Miller, did not go along with the mainline insurance industry in supporting no-fault, reportedly because he feared that no-fault would mean heavy claims on a high-risk company. He has also been outspokenly opposed to the mainstream insurers’ support of Proposition 106, to slash lawyers’ contingency fees.

Until this week, Miller had given no sign he intended to leave the auto insurance business and his company had continued to advertise on television. The advertisements have become quite well known in Southern California, featuring sports announcer Chick Hearn and the slogan, “It’s no problem.”

Usually when policyholders receive non-renewal notices, they have a distinct problem finding new insurance, but Avgeris said in this case his company has made arrangements with another insurance company to provide auto insurance for those now covered by Coastal’s affiliates.

He said it was not being identified at this time “because by the end of the year we may find someone willing to offer coverage at an even lower price.”