160.5% Rate Boost Requested for Assigned Risk Insurance

Turned down by Insurance Commissioner Roxani Gillespie on last year’s request for an average statewide rate increase of 112.3%, the Board of Governors of the California Automobile Assigned Risk Plan on Friday put in a new--and even steeper--rate hike request for this year.

This time, the insurer-dominated board wants an average increase of 160.5%.

Such an increase, if granted, would raise the average annual assigned-risk rate in California from about $700 to $1,820, providing only the minimum coverage required under the state’s mandatory insurance law. This is more than 20% of the annual income, before taxes, of someone who earns the state minimum wage of $4.25 an hour. In a statement, assigned risk officials defended the new increase request on grounds that state law requires the plan--covering about a million drivers who claim to be unable to obtain coverage through the regular market--to be financially self-sustaining.

The insurers who run the assigned risk system say companies lost about $600 million on assigned risk drivers in 1989. They say these losses are growing. After Gillespie turned them down on last year’s request, they filed court appeals of her decision that are still pending.

Gillespie, on the other hand, has declared that raising assigned risk rates like the insurers want would only result in hundreds of thousands of drivers choosing to violate the state’s mandatory insurance law rather than continue to buy the required insurance. The new rates would simply be unaffordable, she says.

The insurance commissioner thus questions the feasibility and practicality of the rate increase requests, and an Insurance Department aide, Reid McClaren, was quick Friday to question whether the latest increase would go through.

“This is nothing more than an application,” McClaren said. “They can only raise their rates when we say it’s OK.”

The assigned risk board’s statement said that if the courts should order last year’s requested 112.3% average increase to be implemented, then this year’s increase would be reduced to only 23% above that. That would bring the statewide average annual rate to $1,830.

The rate increase would probably be higher in central city areas of Los Angeles than the statewide average, according to past statements of the board. But a spokesman for the board said Friday the local rate increases have not yet been calculated, so he could not give a central Los Angeles price.