Low-Cost ‘Lifeline’ Auto Insurance Proposal Backed

The idea of low-cost “lifeline” auto insurance for those who cannot afford current rates won surprising support last week from two longtime adversaries--Insurance Commissioner Chuck Quackenbush and consumer advocate Harvey Rosenfield.

At a Los Angeles hearing called Thursday by Quackenbush to look into the problem of an estimated 4 million uninsured motorists in California, Rosenfield first broached the “lifeline” idea.

As Rosenfield outlined it, insurance companies would sell lifeline policies on a break-even basis. The state would then authorize companies to subsidize lifeline policies with money from the uninsured motorist premiums that drivers with insurance now pay. If that were done, insurance for low-income uninsured drivers might be offered for as little as $20 to $50 a month, Rosenfield said.

Quackenbush surprised many in the hearing room by welcoming the concept, if not all the details.

Rosenfield has been mentioned as a possible challenger to a Quackenbush reelection bid next year, and earlier in the hearing the two had exchanged accusations of “shameful” and “outrageous” conduct on several issues.

But “I like the idea of some kind of lifelines policy,” Quackenbush said. He called Rosenfield’s ideas “decent suggestions.”

The commissioner said he is “at the interesting point of life” where he does not reject new ideas out of hand. Moreover, he added, there is interest on many sides in fresh proposals about making insurance affordable to all.

At the beginning of the hearing, Quackenbush admonished insurer representatives in the audience not to waste time proposing no-fault insurance, twice defeated by the electorate in recent years, as a means of providing lower-cost coverage.

Reaction from leading insurance representatives in Sacramento to the lifeline proposal was strongly negative.

“Auto insurance reform is cutting costs, not creating subsidies,” said Dan Dunmoyer, a leading industry lobbyist.

“Why should other Californians subsidize people who aren’t buying insurance?” he asked.

Rosenfield compared the low-cost policies to lifeline telephone service that companies provide to low-income persons at the expense of other customers, but Dunmoyer rejected that comparison.

“With the lifeline subsidy for telephones, you are talking 25 to 50 cents a month. This would be a lot more.”

As for the insurers selling the policies on a nonprofit basis, Dunmoyer said: “If there’s not profit in a business, then Mr. Rosenfield should do it himself.”

Barry Carmody, president of the Assn. of California Insurance Companies, also blasted the idea.

“This proposal again looks like something that would increase costs, not reduce them. Harvey is proposing a little tax on everybody to help pay for the folks who can’t afford the product.”

The hearing came five days after the chief justice of California, Ronald M. George, said he had been advised that there was a problem in administering heavy first-time fines of at least $1,375 to implement the state’s new, tough mandatory insurance law.

George said that some judges are refusing to levy such fines because they believe the fines only make it harder for low-income people to afford insurance. George raised the possibility that the Judicial Council, which he chairs, might urge the Legislature to revise the law.

At the hearing, one insurance agents spokesperson, Lorelle Hurlbut, executive director of the American Agents Alliance, proposed something akin to a lifeline policy, suggesting a one-time discount for motorists making their first auto insurance purchase.

Quackenbush’s receptive stance toward the lifeline idea, his dismissal of no-fault as a viable alternative and his suggestion that insurers stop blaming everything on Rosenfield’s Proposition 103 marked a broadening of his attempts to move toward a more pro-consumer position.