Atty. Gen. Urges Denial of Insurer Hardship Claims

Atty. Gen. John K. Van de Kamp and consumer groups banded together Wednesday to charge that insurance providers have not proven that they need hardship exemptions from the rate rollbacks ordered by voters under Proposition 103.

Van de Kamp put the objections in a formal petition that calls on Insurance Commissioner Roxani M. Gillespie to deny exemptions sought by hundreds of firms that sell insurance in California. He announced his position at press conferences in San Francisco and Los Angeles.

The petition enjoys no special force of law because it was filed by the attorney general, who is not directly involved in analyzing the exemption applications. But Van de Kamp, a Democrat who is expected to run for governor next year, has been a defender of Proposition 103. The initiative allows citizens to file petitions on insurance matters.

“We’re going to consider it as a petition from a citizen,” Gillespie said Wednesday.

The initiative ordered insurance companies to drop premiums on auto and homeowner policies 20% below the rates in effect in November, 1987. After its passage last fall, the California Supreme Court ruled that Gillespie could waive the requirement for companies that prove they cannot make a fair return.

Thousands of applications for exemptions have been filed with the state and are under investigation by the Department of Insurance. Van de Kamp said Wednesday that at his request an expert, J. Robert Hunter, scrutinized some of the exemption applications and found that they included “bogus claims” of expenses and demands for profit margins up to 35%.

Hunter is a former federal insurance administrator who also found that insurance providers filed “manipulated numbers” with the state to justify being excused from the rollbacks, Van de Kamp said.

As part of his petition, Van de Kamp proposed that Gillespie adopt steps he devised with consumer groups to implement the Proposition 103 rollbacks. The attorney general said limits should be placed on the expenses allowed to count as overhead, and he called on Gillespie to toss out the providers’ estimates of future insurance claims and hold public hearings to come up with independent estimates.

She is free to throw out his suggestions, Van de Kamp said, but he added that “she would be crazy” to do so.

Gillespie said her staff was already taking some of the steps Van de Kamp suggested. But she questioned whether it is right for the attorney general--whose lawyers defend the Department of Insurance when it is sued--to get involved in advocacy with her department.

She also rejected Van de Kamp’s charges that the exemption applications include figures manipulated to make insurance providers appear to be in dire financial distress. The attorney general’s expert surveyed only a few of the applications, then tried to generalize, she said.

“I would not feel comfortable making such a blanket statement with that limited amount of information,” Gillespie said. “That bothers me. We are doing our review thoroughly and completely.”

Gillespie said she does not agree that there can be a generally accepted rate of return that can be applied to a wide number of insurance categories, such as auto, homeowners and liability, all of which are covered by Proposition 103. The allowable profit margin should be decided case by case, Gillespie said.