Don’t Expect Rate Rollbacks, Insurers Say
In different phrases, but saying pretty much the same thing, many of California’s biggest auto insurers are sending policyholders letters saying that they will not get any Proposition 103 rate rollbacks soon and vowing legal action to keep the rollbacks from ever taking effect.
The initiative’s rollback provision has been stayed by the state Supreme Court pending a decision on the insurance industry’s challenge to Proposition 103’s constitutionality. Pending the ruling, insurance companies have been telling their customers that they had better pay the bills in the amounts stated.
These messages have been going out with bills. Policyholders who have not received a bill since the Nov. 8 election have not gotten the rollback letters, but they probably will.
At the same time, since Proposition 103 passed, few companies, if any, appear to have initiated rate increases.
The recent Supreme Court decision lifting the stay on Proposition 103 for essentially all but the rollback provisions left a loophole that enables the companies to legally raise their rates.
But the only rate increases seen thus far began appearing in bills sent out before the election and are now making their way through billing cycles that may last as long as six months. In short, a customer whose bill comes due in January may be receiving notice this month of a rate increase that the insurance company actually approved before the election.
Most of the companies sending messages make no secret of their distaste for Proposition 103.
“Proposition 103 received a majority of the votes cast on Nov. 8, 1988,” says the message sent out by 20th Century. “20th Century Insurance Co. strongly believes that Proposition 103 is invalid. We will challenge the initiative’s provisions in court and seek other relief through the California Department of Insurance.”
Must Pay Premium
Noting the court’s stay of the measure’s rollback provisions, the 20th Century message continues: “Therefore the premium amount and billing options enclosed reflect our current rates. To avoid coverage lapse or interruption, you must pay the indicated amount. 20th Century Insurance Co. will continue to charge its existing insurance rates until this matter is resolved.”
The Automobile Club of Southern California, in its message to policyholders, declares:
“Unfortunately, the massive rate reductions required by Proposition 103 would threaten the (company) with insolvency if implemented. Therefore, the (company) has taken steps to seek legal and administrative relief to protect its solvency and its ability to continue to offer protection to you and other policyholders.
“We do not know how long it will take to conclude this process. However, we are confident that the relief necessary to enable us to continue our 76-year tradition of providing quality insurance coverage to our members will be granted. In order to assure continuation of the important coverages afforded in your policy, please comply with the payment instructions on your insurance billing.”
The Auto Club has also been sending rather elaborate questionnaires to each policyholder with their bills, asking them how many miles they drive, their odometer reading, whether they have safety equipment on their vehicles and so forth.
Gathering Information
A spokesman for the company noted that clauses in Proposition 103 call for a downgrading of territorial ratings, the pricing of premiums according to the accident rates of various neighborhoods, and an upgrading of other factors in the rating process. So, he said, the company is gathering information to eventually comply with this provision.
Fireman’s Fund has been sending letters to its policyholders that have inspired objections from state Insurance Commissioner Roxani Gillespie. She has said that they are a potential violation of provisions of Proposition 103 barring non-renewal of policies in most cases.
The Fireman’s Fund letters offer only a “conditional extension of coverage.” This means, the customers are informed, that “we expressly reserve all rights to discontinue your policy. . . . Your acceptance of these conditions is acknowledged by your payment of the premium due. If you do not wish to accept these conditions, the Notice of Non-Renewal on the reverse side is and remains in effect.
“We are forced to take this action because the provisions of Proposition 103 will result in automobile premiums which are not adequate to pay losses, let alone our operating expenses,” Fireman’s Fund asserts.
Policyholders of both California Casualty and Colonial Penn have contacted The Times in recent days with word of premium increases, respectively, of 11% and 31% with latest bills.
Begun Before Election
However, company representatives who were contacted said these increases, which may vary considerably depending on the geographic location of the customers, were initiated before the election and are being received only now by some customers who are at later stages of the company billing cycles.
One large auto insurance seller that has sent out a relatively mild and neutral message on Proposition 103 is Farmers.
“Proposition 103 has received more ‘Yes’ votes than ‘No’ votes,” the notice to applicants and policyholders says. “However, many features of this proposition, such as rate rollbacks, are subject to complicated legal and administrative interpretations.
“There is a question of the proposition’s constitutionality and the courts must decide this and other issues. . . . In the meantime, we are charging rates at existing levels. Should the Supreme Court decide that the proposition is to be implemented, any required rate adjustments will be reflected in future billings.
“Rest assured that we plan to continue offering Californians the finest insurance protection possible, as we have for the past 60 years.”
