State Cites Travelers on Non-Renewal of Policies

The state Department of Insurance issued a notice of non-compliance Friday to four members of the Travelers Insurance group for refusing to renew private passenger auto policies in California.

A number of insurance companies, since passage of Proposition 103 on the Nov. 8 ballot, have announced they will stop doing business in the state, contending they cannot profitably operate because of the initiative.

Roxani M. Gillespie, state insurance commissioner, issued the first challenge from her office to the recalcitrant companies, naming Travelers Indemnity Co., Charter Oak Fire Insurance Co., Travelers Indemnity Co. of America and Phoenix Insurance Co.

The department charged all four with violating provisions of the new law which prohibits insurers from not renewing private passenger auto policies except for fraud or non-payment.

Travelers has 10 days to either rescind its actions or request a hearing with the department, which has authority to assess heavy fines for non-compliance, Gillespie said.

OKs Implementation

The California Supreme Court on Dec. 7 gave the go-ahead for implementation of Proposition 103, but held up enactment of a 20% rate rollback and creation of a nonprofit corporation to represent consumers, as mandated by the initiative. All other provisions took effect immediately, including a requirement that insurers open their books to scrutiny in rate setting, selection of an insurance commissioner, a ban on discrimination and requirement that insurers adhere to antitrust laws.

On Nov. 7, the Travelers companies announced that “in conjunction with applications for withdrawal from the California insurance market, they would issue notices of non-renewal for all policies of private passenger automobile insurance currently written by them,” Gillespie’s notice of noncompliance said.

Began Issuing Notices

On Nov. 8, California voters approved Proposition 103 and, the notice said, “On or about Nov. 10, 1988, respondents began issuing such notices of non-renewal. These notices were issued without regard to non-payment of premium, fraud or material increase of hazard,” as required by the new law.

“Respondents’ notices of non-renewal are in direct violation” of Proposition 103 “and are therefore illegal and without effect,” the notice said.

Spokesmen for the insurance companies were not immediately available.