Insurers Ask 160% Hike for Risky Drivers

A new round of rate hearings for the state’s assigned risk auto insurance system began Monday with insurance companies asking for a 160.5% average statewide increase and consumer groups questioning whether any increase is justified.

Insurance Commissioner Roxani M. Gillespie, with the approval of the governor, reportedly had been set two weeks ago to order an interim assigned risk rate increase of 85%, but decided to delay her decision until the new hearings are complete.

Gillespie’s legal counsel, Karl Rubinstein, said Monday that the 160.5% request was excessive, but agreed that some increase is necessary.

The current average annual assigned risk rate for the minimum state-required liability insurance is $695. Under the proposed 160.5% increase, the rate would rise to $1,789; in some areas with high numbers of claims, such as the south and east sides of Los Angeles, it would exceed $3,000.

Assigned risk is a system under which drivers supposedly unable to obtain coverage in the regular market are assigned to companies in proportion to each company’s share of statewide auto business.

Last year, 1.23 million drivers enrolled in this system. But many, particularly in urban areas, chose assigned risk not because they could not get insurance in the regular market, but because it was cheaper.

Millions of other drivers go uninsured, and Gillespie has expressed fear that if she agrees to the higher rates requested by insurers, many assigned risk drivers will become uninsured.

The trend toward not carrying auto insurance also could increase Jan. 1, when stringent enforcement of the state’s mandatory auto insurance law is scheduled to lapse.

After that date, unless the Legislature adopts an unexpected emergency extension, drivers stopped by police for speeding and other violations will no longer have their licenses suspended if they are unable to show proof of insurance. The only enforcement of the mandatory law will be to require drivers reporting accidents to submit proof of insurance.

With present enforcement, the state Department of Motor Vehicles has estimated that 5 million California drivers, or 25% of the total, are uninsured.

Insurers said at Monday’s hearing in San Francisco that they lost $630 million on assigned risk customers last year, losses they said were largely passed on in the form of higher premiums to regular customers. Actuary J. Robert Hunter, who is president of the National Insurance Consumer Organization, testified for the consumer groups that such statistics are suspect.

Hunter and others have charged that the real intent of the insurance companies is to see assigned risk rates go so high that risky drivers will opt out of the insurance system altogether. Then, insurers will not have to cover people perceived to be the worst risks.

Gillespie’s refusal last year to agree to a 112.3% assigned risk rate increase proposed by the insurers led to a lawsuit by the insurers against her that is still in the appeals courts. A Superior Court judge’s order allowing the companies a 40% increase for assigned risk drivers with bad safety records has been held up while the appeals are heard.

Representatives of minority and low-income drivers have criticized Gillespie and the Deukmejian Administration for allegedly failing to honor promises to work hard for passage of legislation that would provide an affordable, no-frills policy.

One such representative, Assemblyman Elihu M. Harris (D-Oakland), appeared outside the hearing to assail the proposed assigned risk increases as “obscene and irresponsible.”