Consumer Groups Ask Help in Prop. 103 Hearing Costs

Leaders of three consumer groups said Tuesday that their resources are inadequate to participate in state Insurance Department hearings on hundreds of requests insurance companies are making to be exempted from rate rollbacks called for under Proposition 103.

Officials of the Consumers Union, the Insurance Consumer Action Network and Common Cause said that unless state Insurance Commissioner Roxani Gillespie agrees to order the companies to pay them intervenor funds in advance, they may not even be present at most of the hearings.

However, Harvey Rosenfield, chairman of Voter Revolt, sponsors of Proposition 103, said late Tuesday that he has been told that state Board of Equalization member Conway Collis, a prospective candidate for insurance commissioner in 1990, is organizing a team to represent consumers in the hearings. Collis was not available for comment.

Under a clause of Proposition 103, either Gillespie or a court is allowed to award “reasonable advocacy and witness fees and expenses” to any person who demonstrates that he or she is representing the interests of consumers and “has made a substantial contribution to the adoption of any order, regulation or decision” on rates. The money would be paid by the company making the application.

But the clause calls for an after-the-fact distribution, and Gillespie has yet to indicate that she will even consider any intervenor funding, much less advance funding, before formal rate regulation is due to begin on Nov. 8.

The hearings on exemptions from the rollbacks are expected to begin well before Nov. 8. Gillespie’s office said Tuesday that she will outline her procedures for the hearings at a news conference in San Francisco Thursday.

Proposition 103 requires insurers to roll their rates back 20% from what they were charging on Nov. 8, 1987, a year prior to voter approval of the initiative.

Under last week’s Supreme Court decision, insurers applying for exemptions from that rollback provision can charge the rates they are charging now until the insurance commissioner rules on their applications. Even if the commissioner does order refunds, the companies could appeal to the courts.

Harry Snyder, West Coast director of the Consumers Union, said Tuesday, “Even if all the available consumer groups share the burden and agree to allocate which group will appear at which hearings, we couldn’t do the job we should do without getting some money for expert witnesses and actuaries to examine the insurance company books.”

Walter Zelman, executive director of California Common Cause, said: “About $8 billion is on the table right now in terms of money that could be ordered refunded. I have no doubt that Gillespie will exempt, and in many cases properly so, many companies from the rollbacks. But there are many companies that could give back something and still have a reasonable rate of return.”

So, Zelman said, it is important that the consumer groups provide their own analyses at the hearings, “but there’s no way we can do it without intervenor funding.” Zelman said that a summit of consumer groups will be convened in the next few days to discuss the matter and that he and other consumer representatives are attempting to discuss it with Gillespie before her news conference.

Steven Miller, head of the Insurance Consumer Action Network, agreed with the statements by Zelman and Snyder.

Miller and Snyder participated in a March 20 Insurance Department hearing to consider whether a recent 9.6% average statewide auto insurance rate hike by the State Farm company was justified, but Gillespie denied them intervenor funds for that hearing, saying those portions of Proposition 103 were not yet in effect.

Gillespie has not yet rendered a decision in the State Farm case.