HOW THE COURT RULED ON PROPOSITION 103
ACCEPTED
Good Driver Discounts. Beginning Nov. 8, 1989, any driver licensed for three years who does not have more than one conviction for a moving violation during that period can purchase from any company he or she chooses an auto insurance policy at a 20% discount from regular rates.
Elected Commissioner. Beginning in the 1990 election, the state insurance commissioner will be elected by popular vote instead of being appointed by the governor.
Emergency Authority. If insurance companies leave the state or quit selling certain kinds of policies, the commissioner will be empowered to establish a joint underwriting authority to assign policies to companies remaining in the market.
Territorial Ratings. Beginning in November, auto insurance rates will be determined, in decreasing order of importance, by (1) the policyholder’s driving record, (2) the number of miles driven annually, (3) the number of years of driving experience, and (4) other factors adopted by the commissioner “that have a substantial relationship to the risk of loss.” The last category allows the commissioner to preserve to some extent the territorial rating system, under which rates are based on where customers live.
Antitrust Exemptions. The insurance industry’s California exemptions are repealed.
Banks. Banks are allowed to sell insurance.
Rebates. The present ban on insurance agents giving rebates to customers out of their commissions is repealed.
Group Plans. Group auto and homeowner insurance, similar to group medical plans, are legalized.
Consumer Assistance. The state Department of Insurance will, at a reasonable cost, provide consumers with comparisons of the rates charged by every insurer.
Policy Cancellations. These are restricted to cases where there has been non-payment of premiums, fraud or a “substantial increase in the hazard insured against.”
Intervenor Funding. Persons representing the interests of consumers at any rate hearing or appeal who make a “substantial contribution” to the proceedings will be reimbursed for their expenses by the insurance companies.
Amendments. Provisions of the initiative can be amended only by popular vote, unless the amendment is construed as furthering the measure’s purposes, in which case a two-thirds vote of each house of the Legislature will suffice.
ACCEPTED CONDITIONALLY
Rollback of Rates. According to the original terms of the initiative, effective Nov. 8, 1988, insurers were supposed to reduce charges on every auto, homeowner and commercial or municipal liability insurance policy to 20% less than the rate in effect a year earlier, Nov. 8, 1987, for the same coverage and this lower rate was to be frozen for one year. Proposition 103 said insurers could only gain an exemption from these rollbacks by showing the state insurance commissioner that they were “substantially threatened with insolvency.” However, Thursday the court found “unconstitutional on its face “ the “insolvency” clause and substituted a finding that insurers could win exemption from the rollbacks if they could demonstrate they would not receive a “fair and reasonable” return from the rolled-back rates. The court said that during the first year of the initiative, “an insurer may apply for rate relief and upon making that application charge the rates it requests, but must refund with interest any premiums collected in excess of the rates ultimately approved.”
Rate Regulation. Beginning Nov. 8, 1989, according to the initiative as originally worded, all new rates had to be approved in advance by the commissioner. The court changed this to allow the commissioner to approve an interim rate pending a final decision.
LEFT FOR FUTURE RESOLUTION BY PUBLIC LITIGATION
Premium Taxes. This provision stated that taxes paid by insurance companies on their premiums would be adjusted to ensure that the state would get the same revenue as now, even if the companies took in less premium money as a result of the rollbacks, or took in more as a result of more people buying lower-priced insurance.
RULED UNCONSTITUTIONAL
Consumer Organizations. This provision stated that insurance company bills would contain notices telling policyholders of their right to join an independent, nonprofit corporation that would advocate “the interests of insurance consumers” in any applicable rate proceeding. The organization would be operated by individuals elected by the total membership.
