Study Sees Only Modest Change From Prop. 103 : Insurance: State report also says virtually all companies are violating the initiative with calculations.
Shooting down concerns raised by auto insurers about prospects for skyrocketing rates for some motorists, a state study released Tuesday found that most California drivers would notice only modest changes in their premiums if Proposition 103 were fully implemented.
The study by the state Insurance Department--an 18-month analysis of auto policies covering 10 million Californians--also found that virtually all insurers are currently violating the consumer initiative in the way they calculate premiums.
In what amounted to a goodby slap at auto insurers, outgoing California Insurance Commissioner John Garamendi said in a statement that the report’s results “clearly show that the sky will not fall if insurance companies use the rating factors they are mandated to use under Proposition 103. In fact, the majority of California drivers will not experience rate increases at all.”
The rating factors Garamendi cited are the three primary criteria that Proposition 103 provides for insurers to rely on in calculating premiums: an individual motorist’s safety record, the number of miles driven annually and the years of driving experience.
The intent was to sharply de-emphasize the weight insurers give to the communities where drivers live--a factor that historically penalized urban and minority motorists but which, the study suggests, continues to be used.
Proposition 103, passed in November, 1988, also called for a one-time rollback of auto, home and business insurance rates 20% below 1987 levels.
However, insurers have blocked the initiative through the courts and in administrative hearings. Just last week, a group of insurers asked the U.S. Supreme Court to review a California Supreme Court ruling that upheld rebate regulations imposed by Garamendi.
With regard to auto rates, insurers have also argued that some rural and suburban motorists’ premiums would leap under Proposition 103 unless the insurance commissioner spells out additional rate-setting criteria that can be used to determine premiums.
Armed with the results of the new state study, consumer activists disputed that point. “Insurers have been crying wolf,” said Jamie Court, organizing director for the Proposition 103 Enforcement Project consumer group.
But Tim Hart, a spokesman for the Assn. of California Insurance Cos., said Garamendi himself is to blame for the finding that the insurance industry is violating Proposition 103 by not properly applying the three primary motorist rating factors.
Hart faulted Garamendi for failing to issue regulations indicating to what extent secondary rating factors, such as location of residence, can be used to calculate rates.
Court rushed to Garamendi’s defense, saying the commissioner was thwarted in his efforts to write regulations and to evaluate how insurers are determining auto premiums because the industry refused to yield important data regarding their calculations.
According to the study, only 4% of drivers would face increases of $100 or more in their twice-a-year premiums for bodily injury coverage if the initiative were fully implemented. An equal percentage would benefit from cuts of $100 or more. Bodily injury coverage accounts for roughly half of a driver’s overall insurance bill.
