Insurance: Plenty to Do

Whenever the going gets tough, the California Legislature can be counted on to do what it does best: nothing. That all-too-familiar pattern is now being repeated as Californians and their insurance companies begin to grapple with the enormous ramifications of Proposition 103 and the deep rate rollbacks that the voters have approved.

Some of the consequences of Proposition 103 were foreseen--the insurers’ lawsuits, the threats of some companies to stop writing new auto-insurance policies, their refusal to renew existing policies. But the initiative’s effect on home buyers, some of whom find that homeowners’ insurance rates suddenly have been raised beyond their reach, was less predictable. Still unknown is the effect that the measure will have on car dealers and escrow companies and real-estate dealers and insurance agents whose livelihoods are linked to the availability of liability insurance.

The initial panic over Proposition 103 has been quieted somewhat by the California Supreme Court’s prompt order blocking its implementation while the justices decide whether to hear the insurers’ challenge to its constitutionality. The court’s stay, a responsible move, prompted many of the insurers who had threatened to abandon the California market or to stop issuing new policies to reconsider. Unfortunately, the Legislature seems to have read the stay as a signal that, once again, it is off the hook. Legislative leaders who initially considered calling for an emergency session of the Legislature to deal with the insurance crisis backed off as soon as the court order was issued.

In fact, no matter which way the state Supreme Court rules on the 20%-plus rate cuts mandated by Proposition 103, there is plenty for the Legislature to do. At the very least, the lawmakers should consider the implementing legislation needed to operate the regulatory system outlined by the initiative; that system, less offensive to insurers than the rollbacks, will make them justify their rate increases in advance. The Legislature could also turn its attention to the problems of insurance fraud not addressed by Proposition 103. And the Legislature should be devoting itself to crafting long-term solutions to the insurance crisis. The underlying problems--the explosion in accident claims and litigation, soaring medical bills, rising auto-repair costs--cannot be fixed with rollbacks, but only by a no-fault system, fast-track arbitration or some other cost-cutting device. Other states have done it.

State Sens. David A. Roberti (D-Los Angeles) and Alan Robbins (D-Van Nuys) have called a hearing for this week so that insurers can explain their threats to leave the California market; multimillion-dollar penalties are under discussion. While we’re glad to see some response from the otherwise moribund Legislature, this amounts to very little. What California needs is a special legislative session at which lawmakers--once happy to leave the hard decisions on insurance to the insurers, the trial lawyers or the voters--make the compromises expected of elected representatives. If the furor over the insurance initiatives has proved anything, it is that there are some matters that the Legislature cannot duck forever.