Trying to Turn the Corner on Uninsured-Driver Woes

There has probably been no problem in state government more intractable than that of making mandatory automobile insurance a fact rather than a dictum.

For the past quarter-century, efforts to require every driver to carry a minimum policy paying at least some damages to those not at fault in accidents for injuries and loss of property have been thwarted by a significant minority of the driving population, either unable to afford or unwilling to buy the policy.

Three years ago, the most rigorous attempt yet to force drivers to be insured, authored by then-Bay Area Assemblywoman Jackie Speier, became law, requiring proof of insurance when a driver was stopped for another violation or paid the annual vehicle registration fee. It had long been required that anyone involved in an accident show such proof.

Under Speier’s law, the fines authorized were draconian, reaching, with court fees, $1,350 for a first offense. The statute also provided for the withholding of registration. The fines were so heavy that many judges refused to assess them, some police agencies in poor neighborhoods refused to issue citations, and even Speier, now a state senator, says she didn’t realize the court fees would more than double the basic $500 fine.

After two years under this law, the state Insurance Department reported that the proportion of Californians driving without insurance had declined from 28% to 22%. More than 5 million remained uninsured. However, accidents involving uninsured vehicles dropped by a third.

The statute enacted by Speier’s bill was due to expire Dec. 31. Legislators, particularly from low-income areas, and insurance reformers put Speier on notice that unless a low-cost auto policy was made available, they would not support renewal.

Now the Legislature has passed bills by solid majorities that both institute a “pilot project” of low-cost insurance for three years in Los Angeles County and San Francisco, and renew the proof-of-insurance law, with less stringent fines. The first-time penalty, including court fees, would drop to the $500 range. This would be reduced to the $200 range, including court fees, if a violator went right out and bought the insurance.

Spokesmen for Gov. Gray Davis won’t say if he will sign the bill. But the authors expect that he will. If he does, the California Assigned Risk Plan must begin the pilot project by July 1.

The policy would cost $450 in Los Angeles County and $410 in San Francisco. Sales would be confined to those with annual incomes no more than 150% of the poverty level--$20,910 for a family of three, $13,000 for a single person, verified by a tax return or welfare document.

Also, anyone with more than one traffic violation or more than one at-fault accident in the prior three years would not be eligible.

There would be a 25% surcharge for men between the ages of 19 and 24 with three years’ driving experience, and male and female drivers between 16 and 19 would not be eligible to buy the policy.

Coverage is also less than the old minimum insurance of $15,000 for a single-party bodily injury, $30,000 for a group and $5,000 property damage. The new limits are $10,000, $20,000 and $3,000, respectively. (Still, 90% of bodily injury claims are for less than $10,000, so most claims could be paid).

The Assigned Risk Plan board, supervised by Insurance Commissioner Chuck Quackenbush, would be required to verify every year that the plan isn’t losing money. If it is, the board must raise the price.

After study of this matter and discussions with legislators, lobbyists and others, two things seem clear:

The low-cost pilot plan is very restricted, but it does reflect concessions by the two interest groups that have so long held up insurance reform in California: the insurers and the trial lawyers.

The industry--after fighting for decades to defend the territorial rating system under which residents in some areas pay much more for auto insurance than those in others--accepted a flat-rate plan, so eligible residents of all parts of Los Angeles County and San Francisco would pay the same premium. Although it’s a pilot project, that could be a national precedent.

The lawyers accepted lower policy limits, restricting what they can win in lawsuits.

So after years of stalemate, there was a compromise and, as Speier points out, it comes in a year when one political party controls both the governorship and the Legislature.

“This was helpful in getting the insurers ready to deal,” she said.

An industry lobbyist, Dan Dunmoyer, agreed. But he noted that the insurers were successful with amendments that made the laws by Speier and state Sen. Martha Escutia (D-Whittier) more acceptable to them.

The original proposal was for a policy costing $275 or $300 and for sale all over the state. The insurers hired an actuary to study what price would be necessary to make this self-supporting, and it was at their behest that the price was increased to $450 and $410; they also succeeded in restricting the plan to Los Angeles County and San Francisco.

Statistics are often suspect in insurance policymaking, but the Department of Insurance has released figures indicating that although the initial low-cost prices are below the average premiums already paid in various Los Angeles County ZIP Codes, they are not below the lowest prices some buyers have been able to obtain on their own.

This, if correct, indicates the insurers may have good reason to believe that the low-cost policy can be a moneymaking venture, even if some with more coverage now buy down to the lower limits.

Also, the Assigned Risk board, which was given so much authority, is controlled by the insurers and their friend, Quackenbush.

At a news conference Monday, reformer Harvey Rosenfield and Assembly Speaker Antonio Villaraigosa (D-Los Angeles) acknowledged that they had compromised.

Among many uncertainties about the new plan is just how many people will buy in, and how many of these will not have been insured before. Will it really put a dent in the uninsured problem?

We’ll see. But I think this does represent a move toward making insurance in the urban centers affordable, and is to be applauded.

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Ken Reich can be contacted with your accounts of true consumer adventures at (213) 237-7060 or by e-mail at ken.reich@latimes.com.