Prop. 103 Report Shows $4.2-Billion Savings in State : Insurance: The 1988 initiative has forced insurers to streamline operations and fight fraud--resulting in improved profitability in California, a study says. Insurers disagree.
Proposition 103, the 1988 insurance rollback initiative, has already saved Californians $4.2 billion, despite insurance companies’ continuing refusal to rebate about $2 billion to their customers, a consumer group said in a study released Thursday.
The study by the National Insurance Consumer Organization also found that Prop. 103 has had broad ripple effects, prompting other states to adopt similar measures and sparking the insurance industry to streamline operations and step up its efforts to fight fraud.
And despite the industry’s fears and fierce opposition, Prop. 103 has actually improved insurers’ profitability in California, according to the study. The 82-page report was released in Washington, D.C., by NICO President J. Robert Hunter and consumer advocate Ralph Nader.
Insurance industry groups immediately attacked the study, one calling the voter initiative “a $4-billion disaster.”
The American Insurance Assn., which represents more than 250 U.S. property-casualty insurers, said that any savings since Prop. 103 was enacted “are really the result of fewer auto accidents, the recession, improved vehicle safety and competitive pressures that have kept commercial property and casualty rates low across the country.”
In California, insurance rates have been frozen for much of the time since Prop. 103’s passage, as insurers have battled the Department of Insurance over the rebate issue.
Because of the freezes, the study said, California insurance rates went from being the nation’s third fastest-rising before Prop. 103 to the third slowest-rising. NICO reached its $4.2-billion savings estimate--for auto insurance alone--by comparing the premiums paid from 1990 through 1992 with what would have been paid had earlier trends continued.
NICO also reported that California auto insurers’ profits have averaged 12.6% a year since 1988, as compared to 4% for the period 1985 to 1988. The number of property-casualty insurers licensed in California has risen to 734 from 715 when Prop. 103 passed, the study noted.
Insurance Commissioner John Garamendi, who was praised in the study, called Prop. 103 “the secret success story the insurance industry doesn’t want consumers to know about.”
The Alliance of American Insurers, an industry group, renewed a warning that “political rate suppression” will eventually force insurers into insolvency or make them flee California, adding that “consumers will ultimately pay the price.”
The alliance also attacked the timing of the study’s release, noting that it comes as a Los Angeles judge is pondering a constitutional challenge to Prop. 103.
