Assigned Risk Motorist Policies to Be Restricted : Insurance: Board says ‘good drivers’ will no longer be eligible. A critic of the ruling says it will deny coverage to those in areas where little is available.

The insurer-dominated board of governors of the California Automobile Assigned Risk Plan announced Thursday that, effective May 1, the assigned risk system will no longer accept “good drivers,” who state regulators say have been unable to obtain coverage from regular auto insurers.

This means the 70% or more of the state’s licensed drivers defined by Proposition 103 as “good drivers”--with no more than one traffic violation in the last three years--will no longer be eligible as new applicants for the assigned risk system.

Most good drivers are insured by regular companies, but hundreds of thousands each year apply for assigned risk coverage, often keeping it only a few months.

The decision was quickly branded a violation of state law by Insurance Commissioner Roxani Gillespie’s special attorney in charge of enforcing Proposition 103, Karl Rubinstein.

Rubinstein suggested that scores of thousands of drivers, particularly in the state’s minority communities, would be left in the lurch, with no real means of complying with state law mandating that they carry auto insurance. These people live in areas where very little auto insurance is for sale.

“The commissioner and I are considering the various alternatives, including all available remedies under the state’s Unfair Business Practices Act,” Rubinstein said. “It seems to me this is a concerted effort by the insurers to deny insurance that people need to obey the law.”

Under the assigned risk plan, drivers who cannot obtain insurance through the regular voluntary market--either because their safety records are poor or insurance is unavailable in their areas--have been enrolled in the system. These drivers are assigned to various insurance companies in proportion to the total auto insurance business the companies do in California.

In trying to make auto insurance affordable, Gillespie has held assigned risk rates down in urban areas, making the coverage sold in some instances cheaper than regular coverage. Enrollments in assigned risk have soared past the 1 million mark, perhaps 650,000 of them good drivers, and the insurance companies claim they are losing $600 million a year paying off assigned risk claims.

When Gillespie denied a request for an average 112% increase in assigned risk rates, several big insurers sued to overturn the denial. But that case may run for a year or more. Meantime, the insurers who dominate the assigned risk governing board have grown impatient. Thursday’s decision reflected their desire to reduce the number of assigned risk policies and bring their losses down.

In a statement justifying the decision, Edward F. Held, chairman of the assigned risk governing board, pointed out that “Under Proposition 103, persons who qualify as ‘good drivers’ are entitled to obtain insurance from the insurer of their choice in the voluntary market.”

Therefore, he suggested, they should avail themselves of that provision of the landmark 1988 initiative, and they do not need assigned risk.

But Rubinstein rejected this argument. The fact is, he said, many big insurance companies have been ignoring the “take all comers” provision of Proposition 103 and refusing to sell in many urban and minority areas. He noted that Gillespie recently issued several notices of noncompliance against recalcitrant companies and is attempting to get them to obey the law.

“It is hypocrisy of the first order that some of the same companies who are refusing to observe these provisions of Proposition 103 now, as governors of the assigned risk plan, are refusing to sell to the victims of those policies,” Rubinstein said.

Later, Howard Kalt, a spokesman for the assigned risk board, refuted the hypocrisy charge, saying the law is clear that every good driver is now entitled to obtain auto insurance through regular channels and does not need assigned risk.

PROFIT RULING AWAITED--A decision on what constitutes a fair rate of return for insurance companies is due. A26