Industry Spokesmen Outgun Consumers at Prop. 103 Hearings

During the two-day Los Angeles phase of Insurance Department hearings on implementing Proposition 103, industry representatives vastly outnumbered those from consumer groups, and at times the consumer advocates were absent altogether as industry lawyers urged interpretations that would dilute the force of key parts of the initiative.

For instance, no one challenged a State Farm representative who argued that a Proposition 103 provision saying a driver’s safety record has more “importance” in setting rates than where the driver lives simply means the safety record should be considered first, not necessarily be given greater weight.

Harvey Rosenfield, author of Proposition 103, said Tuesday in an interview that the State Farm interpretation “defies logic” and was not at all what he intended when he wrote the measure.

But Rosenfield was not present for any of the hearings Monday and Tuesday, and his Voter Revolt organization had an aide on hand only briefly.

Rosenfield, who was in New Jersey helping to set up a Voter Revolt chapter there, declared, after Insurance Commissioner Roxani Gillespie had decried his failure to appear in Los Angeles, that he would appear “at some point” for one of two days of hearings to be held Thursday and Friday in San Francisco.

At Tuesday’s hearing, Steven Miller, director of the Insurance Consumer Action Network, told Gillespie, “Unfortunately, consumer groups do not have the resources necessary” to counter overwhelming industry input into how various provisions of Proposition 103 should be interpreted or to challenge impending insurer rate filings.

“Quite frankly, we have no money to hire actuaries or attorneys,” he said. “We have no money for staff. . . . For every consumer representative, there are 40 or 50 companies ready to put on people to represent their interests.”

Miller and other consumers have expressed disappointment that Gillespie has put many restrictions on a provision in Proposition 103 that authorizes her to order insurance companies to pay “reasonable advocacy and witness fees and expenses” to consumer representatives who make “a substantial contribution” to rate decisions.

Without some advance assurance that they will get money, consumer advocates will not be able to risk hiring usually high-paid actuaries to build a case, Miller said Tuesday.

Gillespie responded that she is concerned that politicians might move in on the process if such “intervenor fees” are offered in advance. But she lunched with Miller after Tuesday’s hearing to discuss the issue and indicated she might yet relax her standards.

In the absence of substantial consumer representation at the Los Angeles hearings, the commissioner herself stepped in on several occasions Tuesday to make the consumers’ points for them.

Political Opportunity

It was a good political opportunity for Gillespie, who last week filed a notice of intent to run for the commissioner’s job when it becomes an elective position next year. A Republican who was once an insurance company executive, she has frequently been criticized by Rosenfield and other consumer activists for allegedly being too close to the industry.

Tuesday, when a lawyer for the Preferred Risk Mutual Co. of Iowa, a restricted membership organization, urged the Insurance Department to let his company continue to turn away “good drivers” who do not meet the firm’s other eligibility requirements, despite a provision in Proposition 103 saying such drivers cannot be turned away, Gillespie remarked sharply:

“It’s going to be very difficult. . . . Proposition 103 does require changes.”

Similarly, Gillespie challenged a spokesman for Farmers when he said that his company had been communicating with its customers to tell them that requirements for a 20% good driver discount in Proposition 103 should not be interpreted to mean their rates will go down below what they are now.

“I’m one of your policyholders and I’ve heard nothing from you,” Gillespie interjected.

“Have you paid your premium?” Farmers spokesman Stephen J. Feely asked. “If you have, it should be in the mail.”

Criticism of Department

Gillespie had nothing to say, however, when two consumer advocates charged the Insurance Department with dragging its feet in enforcing Proposition 103.

When Joseph Gardner of the Baldwin Hills Estates Homeowners Assn. complained bitterly that seven months after the passage of Proposition 103 its rate rollbacks have not been implemented and asked, “Why won’t the bureaucracy of the state implement it?” Gillespie was silent.

And she had no response either when a retired Insurance Department employee, Joseph Waldbaum, suggested that if she is really interested in implementing rate rollbacks, she will send audit teams to the offices of the seven biggest insurers in the state to conduct independent examinations of their books, rather than meekly accept their statements that their profits are so small that they should be exempted from the rollbacks.

For every minute taken up at the Los Angeles hearings by Miller, Gardner and Waldbaum, however, by rough calculation, insurance company representatives spoke about five minutes.