Prop. 103 Is Bill of Rights for Consumers

It’s a whole new game for insurance consumers in California, thanks to Thursday’s state Supreme Court decision upholding most of the Proposition 103 insurance-reform measure.

As you undoubtedly realize by now, the action won’t necessarily mean lower rates, and in fact could mean higher rates, pending rate hearings before the state Insurance Department that could take months to complete.

But the ruling clearly allows you to become a more informed and aggressive consumer. It gives you access to more information to shop around for the best deals, and more rights, including the power to challenge industry rates and practices you think are unfair.

“Until now, if consumers were treated unfairly, there was precious little they could do to assert their rights,” says Steven Miller, executive director of the Insurance Consumer Action Network in Los Angeles.

Here are ways you can become a Crusading Consumer under Proposition 103:

- Know your rights. Insurers can no longer arbitrarily cancel or refuse to renew your policy. Such actions can be taken only due to nonpayment of premium, fraud or misrepresentation, or an increase in your hazard as a driver. A company can withdraw from the market, but it must find another insurer to assume your policy.

And starting in November, a company cannot refuse to sell you a new policy as long as you fit the Proposition 103 definition of a good driver, which is someone licensed at least three years with no more than one moving violation in the last three years.

Also, starting in November, your driving record, number of miles you drive and years of driving experience must be the primary factors in determining your rates, not where you live.

Report violations to the state Insurance Department consumer hotline at (800) 233-9045.

- Challenge unfair practices. California’s civil rights and consumer protection laws now apply, for the first time, to insurers. Insurers’ rates and actions can no longer be arbitrary, and instead must be “fair and reasonable” and based on consistent standards, says Judith E. Bell, director of special projects at Consumers Union.

You can challenge rates or practices of insurers, or decisions of the state insurance commissioner, through a process yet to be developed that may involve hearings before an administrative law judge, with sworn testimony and written records. The state Insurance Department or a court may award fees and expenses to you if you succeed.

You also have the right to attend rate hearings. Although that may be impractical, consumer groups are expected to attend in your place, and will challenge insurers in the same way other groups challenge utility rate requests before the state Public Utilities Commission.

- Shop around. There still is a wide variation in rates between insurers. Now, Proposition 103 requires rate information to be made public, providing more information to help you compare.

The state Insurance Department is now required to provide auto insurance rate comparisons for a reasonable fee.

State Sen. Alan Robbins (D-Van Nuys), in a joint project with the state Insurance Department, currently offers a free statewide service providing information to consumers on the 10 cheapest rates in their area. To use it, call his Van Nuys office at (818) 901-5555.

Better comparative rate information may become available soon from legislators, nonprofit consumer organizations such as Consumers Union and the Insurance Consumer Action Network, or from insurance agencies and brokers and computer data companies. Some legislators have proposed that the Department of Motor Vehicles make such information available. Some of this information may in turn be published regularly in newspapers such as The Times.

The business of providing rate information “is going to become a cottage industry across the board,” predicts Joseph W. Cotchett, a lawyer for Ralph Nader and for Voter Revolt, the group that sponsored Proposition 103.

Soon, more banks, credit unions and other financial institutions will begin offering insurance. Security Pacific National Bank already has begun test marketing several lines of insurance by mail to consumers in San Diego County, while First Interstate intends to offer homeowners and life insurance soon.

Also, employers, church groups, membership organizations and other groups could begin offering discounted group insurance plans. Or you could form your own group that could seek a group discount from an insurer. Group plans had been barred prior to Proposition 103.

- Seek commission rebates. Agents for the first time can rebate part of the commissions they receive from insurers. For some lines, such as life insurance, commissions run as high as 200% of the first-year premium. Bargaining with agents may result in discounts.

“Agents and brokers who want to open a new market, or attract a new customer, may find rebates useful,” says Jerry O’Kane, executive vice president of the Independent Insurance Agents and Brokers of California.

Also, agents now can begin offering gifts, such as free toasters, to induce customers to seek quotes, O’Kane says. However, agents may also begin charging for consulting services to assess your risks and recommend coverages, with those fees rebated to you if you buy insurance from them, O’Kane says. Previously, agents were barred from charging for such services.

O’Kane urges you to report any agent abuses of this practice to the Independent Insurance Agents and Brokers of California at (800) 772-8998.

- Take advantage of good driver discounts. Starting in November, insurers must offer a 20% discount below regular rates for “good drivers,” defined in Proposition 103 as those licensed at least three years with no more than one moving violation in the last three years. Many insurers offer good driver discounts already, although generally not as high as 20%.

Other discounts, such as for good students, nonsmokers, nondrinkers or members of car pools, are likely to continue as well.

- Reduce rates by taking on more risk yourself. Take advantage of ways to cut insurance bills without the benefit of Proposition 103. One way is to buy cars that cost less to insure and repair. With Proposition 103, information on which cars carry the lowest insurance rates may be more readily available.

Another way is to increase your deductibles. For example, if you increase your auto insurance collision deductible from $50 to $500, you can cut your collision premium by as much as half, to about $175 from $350. The savings over a few years will more than pay for the higher deductible.

The principle behind this is simple: Insure to protect yourself against a catastrophe, not a nuisance.

Bill Sing welcomes readers’ comments and suggestions for columns but regrets that he cannot respond individually to letters. Write to Bill Sing, Personal Finance, Los Angeles Times, Times Mirror Square, Los Angeles, Calif. 90053.