No More Mr. Nice Guys

The many Californians who think they are paying too much for auto insurance have yet to see the lower prices they voted for last November when they approved Proposition 103. So they really didn’t need the rude reminder they got last week, courtesy of some wordy and indeed arrogant insurance company spokesmen, of why they voted against the insurance industry in the first place.

In a series of hearings called by Insurance Commissioner Roxani Gillespie, who has finally launched the state’s effort to implement Proposition 103, insurance industry spokesmen were, by turns, self-righteous and obfuscatory. Few, if any, seemed to have learned a lesson from the resounding defeat their industry suffered at the hands of state voters last year, despite spending $70 million trying to beat Proposition 103 and promote other initiatives.

The most offensive presentation was made by Michael McCabe, group vice president for Allstate. He told Gillespie that Allstate, the third largest underwriter of auto insurance in California, will fight any attempt her agency makes to end pricing of auto insurance on the basis of where a driver lives. Proposition 103 was specifically written to limit the practice and give an individual’s personal driving record greater weight. McCabe dismissed arguments that the practice causes excessively high premiums in urban areas, especially poor inner-city neighborhoods, by saying that “socially fair prices” do not jibe with the free enterprise system. Cold logic like that must be the reason Allstate bills itself as the “good hands”company--it doesn’t seem to have much in the way of heart.

But at least Allstate was blunt in its objections. Spokesmen for other insurance companies and industry groups seemed to be trying to overwhelm Gillespie and the few consumer advocates who addressed the hearings with reams of actuarial data and legalistic rigamarole. But this bore-them-to-death strategy must not be allowed to distract Gillespie and her agency from the important new responsibility they have under Proposition 103: to strictly regulate companies whose business is not just another private enterprise, but more akin to a public utility.

It is because public utilities are closely regulated that Proposition 103 gave the state insurance commissioner authority to regularly audit insurance companies to determine whether the premiums they charge are excessive. The state Supreme Court upheld the initiative with only one change--that insurance companies be allowed to earn a fair rate of return. So, whether the insurance industry likes it or not, the rules have changed. To her credit, Gillespie tried at several points to remind industry spokesmen of this fact. Perhaps the only benefit of the insurance industry’s overbearing performance will be to remind Gillespie just how vigilant she will have to be. The same goes for the state Legislature, which is also wrestling with several insurance-reform proposals designed to supplement Proposition 103. Despite the initiative’s reforms, there is still a long way to go to improve the insurance system in this state.