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Who Will Pay for Brown's Auto Insurance Tinkering?

May 04, 1986|LOIS SALISBURY | Lois Salisbury, a staff attorney with Public Advocates in San Francisco, currently has a case before the California Supreme Court that challenges the constitutionality of mandating auto insurance without also mandating equitable access to such coverage.

In his New Year's message on Jan. 8, Assembly Speaker Willie Brown branded this as the year of the insurance crisis and, at last, called for insurance reform. "The state of California must do something about this crisis," he said. "We must address the insurance issue . . . . I say to you we can and should address this issue."

Despite Brown's professed commitment to use his impressive leadership skills and power to resolve the auto insurance crisis, he is sponsoring a bill written by and for the insurance industry. If passed, Brown's bill would gut California's compulsory insurance law.

The idea behind the law is simple: All drivers should carry some minimum insurance so that if they cause an accident, their victims will receive some compensation. Under current law, for example, if a family is hit by a drunk driver who carries the minimum required policy, and the mother, who is a homemaker, and her child are killed, the family would receive $30,000. Under Brown's insurance industry bill (AB 3885), the family would receive only funeral expenses, nothing more.

The net effect of Brown's proposal would be increased premiums. Under his proposal, if you were hit by a driver carrying only the state-required minimum insurance, your family would get little or nothing--only provable economic loss, such as medical or funeral expenses. If the person killed or maimed is retired, a child or a housewife, Brown's bill would place no value on that life or the economic loss to the family.

Thus the minimum security and fairness intended by the compulsory automobile insurance law would evaporate. Instead, each family would have to purchase its own security by increasing its under-insured motorist coverage to reduce the risk of being hit by a driver who carries only this new and meaningless policy.

Even now, the compulsory insurance law isn't working. That's because redlining of areas and certain groups, such as the previously uninsured, makes minimum auto liability insurance so expensive that an estimated 50% to 60% of drivers in some sections of Los Angeles, and 15% to 20% statewide, are uninsured. This is the auto insurance crisis that Brown ostensibly promised to address.

In fact, California, with the country's most unregulated insurance practices, is known by the industry as a mecca--they love to do business here. Considering the price of auto insurance in Los Angeles, that is not surprising. It costs drivers with clean records who live in South-Central Los Angeles $1,200 a year to purchase a minimum liability policy, which would pay their victims $15,000 per person and $30,000 per accident. For one-third that price, about $400, virtually any driver with a clean record who lives outside Los Angeles can purchase 10 times that protection--liability insurance with limits of $100,000 per victim, $300,000 per accident.

Uninsured drivers pay for redlining with their driver's licenses. Insured drivers pay with increased premiums for uninsured and under-insured coverage. Either way, the insurance industry reaps the benefit: exorbitant rates for the redlined who can pay; high premiums for the rest of the drivers to protect against those who cannot pay.

Enter Brown with AB 3885. In January he made a lot of promises about what he was going to do to make compulsory auto insurance available, affordable and workable. "Redlining must be eliminated," he said, and minimal coverage must be available to all.

But now Brown is supporting a bill that would not eliminate redlining by territory or by group, nor would it guarantee access to minimum insurance so that California's compulsory auto insurance law is fair and viable. And, if you live in an area where a significant percentage of drivers are likely to carry this new policy, you would be redlined even more to protect against the higher odds that one of these nominally insured drivers will hit you.

In January Brown promised to establish a rate review board to ensure "that all California citizens pay fair premiums." But now Brown is not supporting any bill incorporating rate review.

Without Brown's leadership on this issue, both low-income and middle-class consumers who have been hurt by the unregulated practices of the insurance industry, and by the new enforcement sanctions of the compulsory automobile insurance law, face a lonely and losing battle in Sacramento. The leadership vacuum on this issue is palpably apparent. Consumer bills--be they anti-redlining, pro-regulation or anything else opposed by the insurance industry--can barely muster a few symbolic votes in their favor.

Willie Brown could turn that around. This year could and should be the year of insurance reform, as Brown promised. But if AB 3885 is any measure of where the Assembly Speaker is headed, the legacy of his leadership this year will be a sham.

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