Auto Premium Rate Rise Called Slow in State

Thanks to Proposition 103, California’s auto insurance rates have grown more slowly than those of all but four other states, according to the advocacy group organized to defend the 1988 insurance rate-cutting initiative.

California actually saw a 4.5% drop in liability rates--the mandatory portion of insurance coverage--from 1989, when the initiative took effect, to 1994, the most recent year for which statistics are available, the Proposition 103 Enforcement Project reported Thursday, citing information from the National Assn. of Insurance Commissioners.

Meanwhile, the report continued, premiums in the rest of the country increased by an average of 29.6%.

But the insurance industry says the report ignores the fact that California’s auto insurance rates are still among the nation’s highest and that other factors--including the state’s deepest postwar recession--have also helped restrain insurance companies’ costs.

Another thing that dampened insurers’ liability costs was a 1989 California Supreme Court decision removing a motorist’s right to sue the other driver’s insurance company over an unfair accident settlement.

California’s average liability premium for 1994 was $496.02, compared with $519.39 in 1989, according to the study. The state dropped to 12th most expensive from second most expensive during the period.

California’s overall average premium, including nonmandatory comprehensive and collision coverage, rose 3.1% over the period, to $887.33 in 1994 from $875.60 in 1989.

The Proposition 103 Enforcement Project, based in West Los Angeles and headed by the initiative’s author, Harvey Rosenfield, has regularly released reports tracking the measure’s effects on California insurance prices.

This year, the report arrives in the midst of a referendum campaign to impose a no-fault insurance system in California. Rosenfield and his group vigorously oppose the measure, which would further restrict accident victims’ ability to sue for damages.

The report contends that rates have risen fastest in states with mandatory no-fault systems, such as Massachusetts, Michigan, New York and Colorado. It also says states that have repealed their no-fault laws--for example, New Jersey, Georgia and Connecticut--have seen quick rate decreases.

However, the falling rates did not necessarily reflect the insurance market’s natural reaction to an improved legal environment. New Jersey and Georgia lawmakers mandated rate cuts of 10% and 15%, respectively, in the same legislation that eliminated the no-fault system, said Philip Roberto of the Proposition 103 Enforcement Project.