11 Insurance Firms Ask State for Exemptions to Rollbacks
Eleven California insurance companies, including five of the 10 largest sellers of auto coverage, have applied to the state Department of Insurance for exemptions to rollbacks called for under Proposition 103.
But the Insurance Department is declining to make public documents some of the companies have submitted to support their case.
Proposition 103 specifically permits the insurance commissioner, who heads the Insurance Department, to permit companies to raise their prices to adequate levels if she finds there is a danger of insolvency.
Some companies contend that the rollbacks in policy rates called for under Proposition 103 would force them into insolvency.
Department lawyer Reid McClaran explained Tuesday that the state Supreme Court’s order blocking implementation of the measure pending the court’s decision on whether to review its constitutionality has legally tied the department’s hands.
“We don’t have the option to make the material public at this time,” McClaran said. “We’ve received these requests, we’ve made a note of who filed them and we’ve put them aside. That’s where they’ll stay until the Supreme Court acts. . . . We are doing absolutely nothing with them.”
Provisions Subject to Stay
McClaran emphasized that even the provisions in Proposition 103 requiring that in the future such correspondence be made public are subject to the stay. In the past, the department has held such materials to be confidential under a pre-existing statute.
The companies making the requests include Farmers Insurance Group, the California State Auto Assn., the Automobile Club of Southern California, 20th Century and Mercury insurance, all of whom are among the state’s top 10 sellers.
Smaller sellers making the requests were Williamsburg National Insurance Co., National Automobile and Casualty Co., California Casualty Group, Contractors’ Surety Co., Surety Co. of the Pacific and Wawanesa Mutual Insurance.
McClaran said that each of the companies, if it wished, could make public its own filings. As of Tuesday evening, no company had done so, although two companies said they had sent the department only a general letter stating an intent to ask for an exemption. These letters contained no financial information, they said.
“We sent a letter to the Department of Insurance requesting a hearing under Proposition 103 for rate relief,” said Rick Dinon, a spokesman for 20th Century, California’s sixth-largest auto insurance seller.
“Other than that, we would not know what to file. . . . It’s our expectation that they (the Insurance Department) will provide some organization in terms of what exhibits they want, what materials and so forth.”
George Joseph, chief executive of the Mercury group, said his company had only sent a general letter.
“The Insurance Department originally promised they would issue some guidelines,” Joseph said. “There are no guidelines yet. We’re asking what they want to see.”
Three other companies approached for comment would not talk about what they had filed.
Tom Rohner, a spokesman for the California State Auto Assn., said that to release anything prior to a lifting of the Supreme Court stay would be “premature and just lead to speculation.”
Jennifer Nicholson, speaking for the Automobile Club of Southern California, said counsel for the company is evaluating whether to release the filings.
‘Useful to Our Competitors’
But, she added, “There is proprietary information in there that would be very useful to our competitors if we were to release that information.” She said, however, that the Auto Club had already filed extensive information with the Insurance Department, “a file 8 inches thick.”
Jeffrey Beyer, speaking for Farmers, said his company had too much “respect” for the Insurance Department’s decision not to release Farmers’ filings to release the filings itself.
However, McClaran of the Insurance Department said Farmers’ response about “respect “ was inappropriate because the Insurance Department does not care what Farmers’ says publicly about the filings.
Mercury and 20th Century have already made public some financial data, claiming an inability to give the rollbacks and at the same time remain solvent.
Mercury has said it would exhaust its surplus within 14 months if the rollbacks were allowed to go into effect and there were no upward rate adjustments. Dinon, testifying Friday for 20th Century before a legislative committee, said that if rollbacks called for under Proposition 103 were allowed to go into effect, his company would lose $91 million in the next 12 months rather than posting a projected $40-million profit.
If further discounts mandated under 103 for “good drivers” are allowed to go into effect in 1989, then 20th Century would lose an additional $160 million in the following 12 months, Dinon testified.
Meanwhile, the uncertainty about what filings some of the companies may be making to the Insurance Department led to a threat by state Sen. Alan Robbins (D-Van Nuys), chairman of the Senate’s insurance committee, to subpoena the material for a Dec. 13 hearing of his committee into the present insurance situation.
‘Doesn’t Make Any Sense’
Robbins expressed dissatisfaction with the Insurance Department’s refusal to release the filings, saying it “doesn’t make any sense.”
“The companies are saying that they can’t afford to make the rate adjustments,” Robbins said. “If they can’t afford them, they shouldn’t have an objection to the insurance commissioner making public the financial information that will back that up.”
Implementation of Proposition 103 was blocked by the Supreme Court two days after the election. In those two days, not a single one of the more than 700 companies selling various forms of property-casualty insurance in the state had announced an intention to comply with its terms.
