Gillespie’s ‘New’ Insurance Plan--a Confusing Twist

Adding a confusing new twist in her long, and mainly fruitless, efforts to implement Proposition 103, Insurance Commissioner Roxani Gillespie on Monday said she is releasing a new auto insurance pricing plan for the state that would lead to price cutbacks in Los Angeles and Orange counties.

But within hours, a key staff aide, as well as attorneys who have followed matters closely questioned whether what Gillespie was announcing was really new, and whether her figures for reductions and increases were correct.

The attorneys noted besides that four of the state’s largest sellers of auto insurance have sued to block Gillespie’s pricing plans and that a hearing is set in Los Angeles Superior Court on the suits April 20, at which time preliminary injunctions could be issued against them.

Gillespie, speaking to reporters in Sacramento, provided a chart of composite averages claiming that unless the courts intervened, her new, permanent pricing regulations by next fall would mean about a 21% decrease in auto insurance rates in Los Angeles County, an 8% reduction in Orange County and a 1% decrease in San Francisco.

At the same time, she said, increases in the rest of the state by insurers to compensate themselves for these decreases would be limited to 4.5%.

Together, the increases and decreases would represent a slight narrowing of existing price differentials among urban, suburban and rural prices that Proposition 103 was meant to alter. Gillespie refuses to implement the letter of the measure because, she maintains, this would mean a majority of the state’s policyholders would pay vastly more in order that urban dwellers in Los Angeles and Orange counties could pay considerably less.

Gillespie’s appearance was barely over Monday, however, before the staff aide she had assigned to field press inquiries on the “new” pricing plan bluntly downplayed its significance.

Elizabeth Mulroy, a departmental legal officer, said the new “permanent” pricing regulation that Gillespie announced Monday had actually been forwarded to the state Office of Administrative Law for review weeks ago and is not significantly different from emergency pricing regulations issued by Gillespie last December.

Mulroy added that no figures for either price reductions or increases in various counties are mentioned in either the emergency or permanent regulations and that the figures provided Monday by Gillespie represent only estimates of what could take place.

In any event, inflation has been increasing and both sets of regulations limit increases in the counties outside Los Angeles, Orange and San Francisco to the U.S. government’s consumer price index for the previous year. As a result, allowable increases would probably be more than 5%--not 4.5%--by the time the regulations went into effect next fall, assuming the courts allowed them to.

As the Republican Gillespie was speaking out, two of the Democratic candidates to succeed her as commissioner, when it becomes an elective post in November, were making their formal announcements of candidacy Monday.

Both Board of Equalization President Conway Collis and state Sen. John Garamendi assailed Gillespie--an appointee of Gov. George Deukmejian who is not a candidate for insurance commissioner--as an inept administrator who has failed to rein in the insurance companies in accord with the will of the voters.

Collis, adopting vitriolic language, declared, “If I’m elected commissioner, I’m not going to be fair to the insurance industry. I’m not going to be reasonable. I’m not going to be even-handed. I’m going to break their backs. I’m going to be their worst nightmare come true.”

Asked if such language was an invitation to company lawyers to sue to invalidate what he might do as commissioner on grounds of arbitrariness and bias, Collis said that press conference statements would not be enough to establish such a case, that the insurers would have to demonstrate that he was abusive in his actual administration.

In contrast to Gillespie’s time-consuming hearing procedures attempting to get insurers to comply with her edicts, Collis said, “If any of those arrogant executives who run the insurance industry try to stop me by knowingly violating the law, I’m going to see that they’re prosecuted as criminals and thrown in jail as they belong.”

Garamendi was milder, but he still sharply criticized Gillespie for allegedly failing to audit company financial statements and force the companies to open their books. As commissioner, he said, he would guarantee an end to “the days of mystery bookkeeping by the insurance industry.”

Consumers have been “left in the woods” by Gillespie, said Garamendi.