Proper enforcement of Proposition 103 would have been a daunting technical and political challenge for any public official. The insurance industry is complex, highly competitive and also secretive. The high cost of auto insurance hits almost everyone in the pocketbook. Add to that the fact that state Insurance Commissioner Roxani Gillespie is a former insurance company executive and suspect in the eyes of the consumer activists who wrote the initiative.
Still, it seemed that most Californians were willing to wait and see how Gillespie would implement Proposition 103 before judging her, unlike her critics, who have been demanding her resignation for months. But now Gillespie has decided, unilaterally and with only the most minimal information available to the public, that 402 companies that sell automobile insurance in this state will be exempt from the rate rollbacks mandated by Proposition 103.
When state voters approved that initiative, despite a massive campaign against it by the insurance industry, they cast their ballots for two things: They wanted insurance rates, especially for auto coverage, to go down. And they wanted tighter regulation of companies that sell insurance in California. Gillespie's critics claim she is letting state residents down on both counts, and Wednesday's announcement does seems to fit that pattern.
The heart of Proposition 103's appeal was its provision that auto insurance companies roll back their rates 20%. When the state Supreme Court upheld it, a major provision was added to the debate, however. Insurance companies could be exempt from rate rollbacks if they could prove lower rates would prevent them from making "a fair rate of return."
Gillespie has spent the last several weeks holding hearings and studying data provided by the 449 insurance companies that requested exemptions from Proposition 103 under the court's ruling. Wednesday she announced that most of them will probably not have to reduce rates. The list includes some of the biggest sellers of automobile insurance in the state, including Farmers, the Automobile Club of Southern California and State Farm Mutual. Exempt companies have sold 53% of the insurance policies in California, which led Gillespie to state flatly that that most Californians are "not going to get lower auto insurance rates," despite Proposition 103. That sounds as if she has made up her mind about that matter before the state has had a chance to closely examine the books of the insurance companies that want exemptions.
Gillespie insists that the key to lower auto insurance rates is a "no-fault" insurance system that will reduce the number of lawsuits that result from auto accidents. That has long been the insurance industry's position, and it has some merit. But at this juncture, with the Legislature wrangling over an unsatisfactory no-fault proposal that is unlikely to be enacted, arguing for no-fault is academic. California does not have a no-fault system yet. It does have Proposition 103. And it looks as if the official charged with enforcing it is bending over backward to benefit the insurance industry, but won't do the same for consumers.