CALIFORNIA COMMENTARY : Prop. 103 a Nadir for Consumers : Rather than skirting the court decision on rate rollbacks, its advocates should back a no-fault insurance plan.

With great fanfare, Ralph Nader held a press conference in January to release a study hailing the “success” of Proposition 103. But on Feb. 26, Proposition 103 was assessed in different terms.

In an 85-page opinion, a Los Angeles Superior Court judge described Proposition 103 as “a problem child from its inception” and struck down insurance commissioner John Garamendi’s regulations as “invalid and void.”

It’s fair to ask, “What’s going on here?” In the beginning of his term, Garamendi blamed his predecessor for his Proposition 103 problems. Then he blamed insurers. Now he blames the court. But the commissioner is placing blame in all the wrong places. And I have a hunch Nader knows that, too.

Indeed, when I read Nader’s “success” claims, I was reminded of Vermont Sen. George Aiken’s visit to President Johnson just as Johnson’s Vietnam policy was going sour. After a heated discussion between the two old friends, Aiken is reported to have said, “Damn it, Lyndon, just declare victory and get out!”

That may be what Nader is trying to do with Proposition 103, because if ever there was an expensive failure of public policy, this is it. Proposition 103 has more than doubled the state Insurance Department’s budget and staff. It has become a cash cow for some of the proposition’s most prominent advocates--shoveling hundreds of thousands of dollars to them in “intervenor fees.” It has generated millions of dollars in legal fees on all sides. Yet Proposition 103 has delivered barely 10% of the rebates promised and is unlikely to deliver much more.

Proposition 103 promised automatic 20% rate rollbacks, without regard to whether they were justified or the effect they would have on insurers. But the state Supreme Court struck that down as unconstitutional.

After excising the unconstitutional guts of Proposition 103’s automatic rollback, the Supreme Court tried to stitch the proposition back together. First, it said that insurance companies could be ordered to pay rollbacks, but no rollback could deny an insurer the opportunity to earn a fair rate of return.

Second, the Supreme Court approved the proposition’s language requiring the commissioner to review new insurance rates before they go into effect--a new approach in California, but widely used in many other states.

If this is all the Supreme Court did, why are we now in the middle of such a bitter legal battle? The answer is simple. Garamendi has been trying to force insurers to make the automatic rate rollbacks that the Supreme Court found unconstitutional.

And instead of devising a rate regulation plan like those in other states, he has tried to expand his rate-review authority under Proposition 103 into a rate-setting power that the proposition does not give him.

Here’s the truth about Proposition 103’s rollbacks: They are a fraud on the public and will never deliver the rebates that Nader and his allies promised.

Nader also said that Proposition 103 caused premiums in California to stop growing. Like the rooster who claims credit for the sunrise, this can only be true if Proposition 103 created the recession, which has resulted in the loss of 800,000 jobs in California and 1 million automobile commuting trips. That reduction has led to lower insurance costs and thus less pressure on rates.

Nader said the country is rushing to follow California’s Proposition 103 example. Only Nevada has enacted such a rate rollback, and the federal courts found that law unconstitutional, too. Moreover, Arizona voters convincingly rejected a Proposition 103 clone in 1990.

The report released by Nader says there are more insurers in California selling insurance now than before Proposition 103 was passed. But that’s not true of auto insurance, which was the issue that fueled the campaign. Eighty percent of all auto insurance is now sold by the 10 biggest carriers. Before Proposition 103, it was less than 72%.

But if Proposition 103 hasn’t solved California’s auto insurance problems, there is a solution that would improve benefits, cut costs and make insurance affordable. Last year, a very good no-fault bill was introduced in the Legislature. It garnered support from a wide range of groups, including consumer and civil-rights organizations, as well as insurers. An independent actuarial analysis of the bill showed it would save Californians $1.8 billion a year in premiums and provide good drivers with a basic policy for $220 a year.

But the current system is a lawsuit machine that feeds money to those who make their living from auto accident lawsuits. And they are a powerful group. So the no-fault bill died.

Guess who opposes no-fault? Ralph Nader. If I had been he, I would have declared victory for Proposition 103, too, and then hope that no one would notice what really happened.