State Could Be Forced to Offer Car Insurance, Activist Says

The author of the landmark Proposition 103 insurance initiative said Friday that if insurance companies refuse to accept the measure, which was approved by the state Supreme Court this week, the state government might have to go into the auto insurance business.

“I frankly think the free marketplace is better than a state system,” consumer activist Harvey Rosenfield said at a news conference after a speaking appearance in Lancaster. But “if they don’t want to comply, if they continue to behave as they have behaved since the election . . . if they constantly stall and stonewall, I think the possibility of a state-run system is huge--very likely,” he said.

He said a state-run system would be needed if insurance companies pull out of the state, as they have threatened, in response to the restrictions enacted in Proposition 103.

At a news conference after a luncheon speech to the Antelope Valley Bar Assn., Rosenfield said implementing rate rollbacks and refunds mandated by the initiative will be the “crucible of electoral politics” in the state for the next two years.

As approved by voters in November, Proposition 103 called for consumer refunds and 20% rollbacks based on 1987 rates.

Measure Modified

But Thursday, the state Supreme Court modified the required rollbacks, allowing exceptions for companies that show they could not earn a “fair and reasonable” return. Analysts on both sides have said this will probably result in rollbacks lower than 20% and will delay cutbacks and refunds as insurance companies take their case to the state insurance commissioner.

Insurers had charged in campaign ads that the initiative would lead to a state insurance company. And State Insurance Commissioner Roxani Gillespie, whom insurance revolt leaders accuse of having a pro-industry bias, told legislative hearings before last year’s election that Proposition 103 might force the state to go into the insurance business by rendering many companies insolvent.

At that time, Rosenfield said there was no language in the initiative that would allow a state company, though he made it clear that Proposition 103 gave the insurance commissioner emergency power in the event of an exodus from California by insurance companies. He and other activists also charged insurers with manipulating statistics to make profits appear lower than they actually were.

When asked Friday about the issue, Rosenfield said the court decision gives insurance companies the opportunity to accept Proposition 103 and “earn the trust and respect” of consumers.

But Rosenfield said he would not be displeased if large companies such as State Farm pull out of California as a result of the measure. He accused that company of “gouging people right through today,” and predicted that smaller companies would move in to fill the void in the market if large companies leave.

“If they left, there would be 50 companies ready to jump in,” he said. “They want the opportunity to serve the consumer.”

Anticipating Fight

Rosenfield acknowledged that his Voter Revolt organization expects a stiff fight on rollbacks and other issues in the coming months. He said the national insurance industry plans to spend millions of dollars on discrediting Proposition 103 around the state and nation.

But he said Gillespie, the Deukmejian Administration and future candidates will feel intense pressure from voters to force industry compliance.

When companies submit rate proposals to the insurance commissioner as required by the new law, Rosenfield said, “Most companies will not be able to open their books and justify an increase.”

This means that consumers eventually will get refunds, he said. “I can’t tell you when, but I can tell you for certain the check will be in the mail.”

Rosenfield predicted that a bipartisan consensus will emerge in favor of Proposition 103 refunds and said the issue would dominate the 1990 elections. The impact of the Supreme Court decision goes beyond insurance reform, Rosenfield said, and the measure demonstrates new voter independence and an emphasis on “pocketbook solutions.”

Seeking Candidates

Prospective candidates have already emerged for the 1990 election for insurance commissioner, which Proposition 103 has transformed into an elected and politically potent office. Rosenfield said the Voter Revolt group is looking for a candidate to endorse and is hoping for a spirited battle between a pro-consumer Democratic candidate and a pro-consumer Republican. He said he has no intention of running for the office.

He accused legislators of ignoring the voters’ mandate in favor of the insurance lobby.

Rosenfield singled out two Antelope Valley-area lawmakers, Assemblyman Phillip Wyman (R-Tehachapi) and Assemblywoman Cathie Wright (R-Simi Valley). He cited Wright’s vote in the Assembly Insurance Committee last month to approve a no-fault insurance bill, which he described as an industry attempt to escape rollbacks.

Rosenfield fielded several hostile questions from representatives of the insurance industry. One questioner asked how Proposition 103 would deal with the proliferation of fraudulent claims and uninsured motorists, two factors that insurers blame for rising rates.

On the question of fraud, Rosenfield charged that insurance companies have passed on their costs to consumers rather than aggressively pursuing questionable claims, and said the changes in the law will give companies new financial incentive to crack down on fraud. And he said many motorists who are uninsured because they cannot afford premiums will buy insurance for the first time because of lower rates.

Rosenfield’s last questioner also identified himself as a member of the insurance industry and asked simply: “Mr. Rosenfield, do you believe that insurance companies have a right to make a profit?”

Rosenfield’s answer was a brief, “Yes.”