Proposition 103 Still on Hold

Socialist solutions to economic problems don’t work. They never have and they never will. And yet, Rosenfield is recommending a socialist “solution” to the economic problem of auto insurance.

Without questioning the wisdom of copying the economic solutions of a country whose economy is heading south compared to ours, let’s look at the state-run Insurance Corp. of British Columbia (ICBC).

Rosenfield says that for every dollar paid in, the ICBC pays out a dollar in claims. That is not true. In 1988, 92 cents was paid out. That is still pretty good, but there is a reason for it: a surplus of over $2 billion which generates investment income that helps to pay claims. In 1988 the ICBC took in $1 billion in premiums. This means it has a surplus-to-premium ratio of 2-to-1. This is six times greater than the California Department of Insurance believes is sufficient.

Rosenfield says that rates are cheaper in British Columbia than in California. Well, they are also cheaper in 47 other states--none of which has a state-run system. There are many factors involved in insurance rates--such as population density, tort laws and crime rates. These factors vary from state to state, and even more so from country to country. A more useful comparison would be to compare ICBC’s rates to those of its neighbor Alberta. British Columbia’s rates are higher. By the way, Alberta does not have a state-run system like ICBC. It has a private sector insurance industry.

But again, the many variables involved make comparisons suspect. So let’s look at ICBC’s system strictly by itself. In the past three years its rates have risen 35%. Now there is a useful comparison! It says that whatever ICBC is doing, it is not keeping the rates down. Despite the ICBC efforts to manage claim costs by “aggressively promoting safe driving, negotiating reduced auto repair rates and health care charges and really going after fraud” it is unable to provide relief from rising auto insurance rates. Some solution.

PHIL FOX

San Diego