Gillespie Will Oppose Plan to Limit Assigned Risk Eligibility

Insurance Commissioner Roxani Gillespie said Tuesday she will seek a court injunction to prevent the insurers who run the California Automobile Assigned Risk Plan from refusing to sell policies to hundreds of thousands of “good drivers” who cannot buy through the regular market.

Gillespie, speaking at a San Francisco news conference, also said she intends to institute after public hearings in June a two-tier assigned risk sales plan under which drivers from families earning less than $26,000 a year would be permitted to buy liability coverage required under the state’s mandatory insurance law for $700 a year.

Within an hour of her announcements, the insurers--who had earlier refused entreaties from the commissioner to make such a special provision for low-income groups--responded that Gillespie has no authority to take either step and said the assigned risk board will fight her in court.

An aide to Gillespie said papers seeking the injunction will be filed by the end of the week. A hearing is expected before the May 1 deadline, when insurers say they will stop selling the assigned risk policies to new applicants who are “good drivers.”

The exchange between Gillespie and the insurers marked the latest in a series of disputes in which the commissioner has insisted that the industry assume some social responsibility for keeping insurance prices down for those who can least afford them, and the insurers have answered that the law requires only that they keep the assigned risk system solvent.

Under the assigned risk plan, drivers who cannot obtain insurance--either because of poor driving records or because insurance is unavailable in their areas--are assigned to various insurance companies in proportion to the business the companies do in the state. “Good drivers” are defined as those with no more than one traffic violation in the last three years.

Gillespie has refused requests by the insurers for a 112.3% rate increase in the assigned risk system. The insurers, who say the plan lost $600 million in 1989, have responded with court appeals and a new request for a 160.5% hike.

The insurance commissioner said Tuesday, “California has an insurance emergency because automobile insurance, especially for low- and moderate-income drivers, is becoming scarcer due to its high cost. This emergency affects the state’s public welfare, criminal justice system, transportation system and overall economy.”

But Steve Feely, vice chairman of the Assigned Risk Plan and an executive at the Farmers group of companies, challenged Gillespie’s right to do anything about this. He said that to institute a low-income sales plan, the commissioner would first have to seek approval from the Legislature.

“There is no way of knowing how many people might be made eligible under (her) proposal, but we have grave concerns about any proposal which would substantially increase the number of drivers in the plan who would be paying inadequate rates,” Feely said.

Gillespie, meanwhile, also announced that she will hold hearings later this spring into alleged “redlining” of minorities and other low-income groups by insurance companies in violation of Proposition 103, which bars such discrimination.

The commissioner’s announcements were hailed by consumer leaders at her news conference. “We’re encouraged,” said Robert Gnaizda of Public Advocates, “because we believe the assigned risk governors are in violation of the law on several counts.”