Next Step for Proposition 103

Next week State Insurance Commissioner Roxanni Gillespie takes the next step in the long, complex process of putting Proposition 103 to work, and perhaps finally lowering the cost of automobile insurance for some California drivers.

That will happen when she holds public hearings during which seven auto insurance companies that Gillespie has ordered to roll back rates 20%, as required by Proposition 103, will appeal her order. Adding to interest in the hearings is the fact that the first company sending its executives to testify is Allstate, one of the most biggest sellers of casualty insurance in the nation and a major underwriter of automobile coverage in California. Thus far, Allstate officials have reacted to Proposition 103 with a Jekyll-and-Hyde performance.

Earlier, when Gillespie held hearings on the controversial system known as territorial rating--under which auto insurers charge different rates depending on where a driver lives--an Allstate attorney challenged Proposition 103’s provisions banning the practice. Despite evidence that territorial rating is a form of redlining that raises auto insurance rates for the inner-city poor, the attorney said that Allstate has no duty to consider social factors, like poverty, in setting its rates.

The public outcry that resulted from that hard-nosed attitude prompted Allstate officials to backtrack, and then to offer to join consumer activists in trying to draft state legislation, or even new ballot initiatives, to help implement Proposition 103. To their credit, they have since been working with at least some consumer groups in an effort to design a no-fault insurance system for California that would allow drivers with poverty-level incomes to buy a “no-frills” auto insurance policy at minimal cost.

But some of the activists who helped draft Proposition 103 remain suspicious of Allstate’s motives. And that should come as no surprise, given the negative image the insurance industry--or at least those companies like Allstate that provide casualty coverage--has in California.

That negative image is a major reason that Proposition 103 was passed by California voters in the same election that saw other insurance reform initiatives, including two written by insurance industry lobbyists and supported by the industry with $60 million in campaign funds, soundly defeated. And the public’s mood has not improved in the ensuing months, as drivers have failed to see the rate rollbacks Proposition 103 mandated. Anger is also mounting because Gillespie, a former insurance company executive appointed to her post by Gov. George Deukmejian, does not seem interested in making her former colleagues abide by the new law.

That is why Gillespie’s performance will be closely watched. It may be her last chance to convince state voters--who she hopes will keep her on the job when her post becomes elective in 1990--that she really wants to enforce the new law rather than undermine it. But the hearings will also be important to the insurance industry, for it will have a chance to show the public that it really wants to reform the insurance business in California, and not simply find legal and financial loopholes that will help it get around the will of the people.