Group Proposes No-Frills Auto Policy for $160

A proposal by a coalition of minority groups for making available to all Californians a no-frills, no-fault auto insurance policy that would satisfy the state’s mandatory insurance law and cost only about $160 per automobile won backing Wednesday from state Insurance Commissioner Roxani Gillespie.

The proposal probably faces an uphill fight because it would require assent by the Legislature to changes in the legal system that have been resisted by the California Trial Lawyers Assn. and its powerful friends in the state Senate and Assembly.

In exchange for getting insurance at such a low rate, buyers would have to agree to give up all pain and suffering damages except for the most serious and permanent injuries, and they would voluntarily agree to severely restrict lawsuits against others.

But Gillespie said Wednesday that actuaries in the state Insurance Department have told her that the $160 price would allow insurance companies to break even without a state subsidy. She said she has agreed to convene a high-level meeting, including Deukmejian Administration officials and representatives of the insurance industry, the trial lawyers and consumer groups, to settle on the details.

“We reviewed the work that had been done, and there is definitely a lot of logic in what they have put forth, and we feel very strongly it’s a point of departure to obtain the input of the interested parties and go forth with such a basic plan,” Gillespie said.

In a letter to John Gamboa, executive director of the Latino Issues Forum, Gillespie said, “I would like to wholeheartedly congratulate your group for the approach that you have taken.”

The proposal, for which a legislative sponsor has yet to be named, is being made by the Latino Issues Forum; the California Council of Urban Leagues; the Oakland Citizens Committee for Urban Renewal; Mario Obledo, the national chair of Jesse Jackson’s Rainbow Coalition; the Interdenominational Ministerial Alliance, and the League of United Latin American Citizens.

The no-frills, no-fault policy being proposed by these groups would cost drivers the same amount no matter where they live. Under the so-called territorial rating system now used by insurance companies, policyholders who live in certain areas--heavily congested cities, for instance--pay much more for insurance.

Keep People Out of Jail

Under a no-fault system, people who have accidents collect for their injuries from their own insurance companies, regardless of who is at fault in the accident. Gillespie said that her actuaries have told her that “if you have a first party system for that portion, you do not need territorial-based pricing.”

Gamboa declared: “The $160 no-frills policy will keep 500,000 Californians out of jail and provide affordable insurance to 6 million low- and moderate-income Californians. It could also lower auto insurance rates for all Californians.”

He noted that those wanting additional coverage, beyond the equivalent of the $15,000 individual/$30,000 group liability limits required now by the state, would be free to buy excess insurance.

George Dean, president of the California Council of Urban Leagues, said, “We hope that everyone involved in the insurance crisis will work toward a compromise that ensures that the working poor do not have to make the choice between jail and high-cost insurance that exceeds all their discretionary income.”

In fact, very few Californians have gone to jail for not carrying the required liability insurance, but the state Department of Motor Vehicles recently revealed that during 1988, the first full year of toughened mandatory insurance enforcement, more than 550,000 drivers had had their licenses suspended.

‘Equal Treatment’

Obledo, meanwhile, said that the proposed no-frills policy would “eliminate the gap in Proposition 103” as far as assuring an affordable policy for everyone, and thereby “ensure equal treatment for all.”

First reaction from the legal community, however, was very cool. Some attorneys at a meeting of defense counsel for the insurance companies in Los Angeles on Wednesday questioned whether the suggested price was too low. They said a major state subsidy might have to be provided to make such a plan financially viable.

A spokeswoman for the Trial Lawyers Assn., Patti Levine, said the trial lawyers would “probably” oppose a plan that allowed accident victims even voluntarily to give up their rights to sue, although she said the association had formed a committee to examine such proposals for “mini-policies.”

‘Stingy’ Benefit Package

“Our understanding is that this proposal has a very stingy no-fault benefit package and as any mini-policy they tend to discriminate against the poor by saying poor people should not be compensated as well as others,” Levine said.

Insurance industry officials who have been involved in discussions with the minority coalition have said they believe that if a no-frills, no-fault policy were offered, a large majority of Californians, interested in low prices and not really expecting to have accidents, would select it. But some have also expressed concern that once people had accidents, they might be dissatisfied with the level of benefits they received.