A state Insurance Department aide, asked by Insurance Commissioner Roxani Gillespie to review proposed legislation that would create a state-operated auto insurance company to sell the liability coverage required under California law, has come up with a surprisingly favorable assessment.
The author of the bill, Assemblyman Richard Polanco (D-Los Angeles), had expressed concern that Gov. George Deukmejian might veto it, if the Legislature were to pass it.
But in the first report on the bill by a Deukmejian Administration member, Brian Walkup of the Insurance Department said he supports what Polanco wants to do "in general."
Walkup said he has concluded that such a company would have fewer expenses and would be able to offer insurance for less in premiums to many high-risk drivers than private insurance companies.
For the Record
Los Angeles Times Wednesday March 18, 1987 Home Edition Part 1 Page 2 Column 1 Metro Desk 3 inches; 82 words Type of Material: Correction
The Times erroneously reported in Monday's editions that Brian Walkup, the state Insurance Department's legislative liaison, had reported favorably on proposed legislation that would create a state-operated auto insurance company to sell the liability coverage required under California law. The quotes, in fact, were taken from a memo prepared by Assistant Insurance Commissioner Richard Roth, and all quotes should have been attributed to him, instead of Walkup. Walkup, whose name appeared on the top of each page of the memo, was the recipient of the report, not its author.
The departmental aide said under the Polanco bill, all those in the Assigned Risk insurance plans would probably be enrolled in the state company and that any others wishing to buy insurance through it could do so as well.
Comparing the proposed state Automobile Insurance Fund to California's state Workers Compensation Fund, Walkup noted that the compensation fund "is notable for its ability to operate very efficiently." It "has a demonstrated record of operating with a lower expense ratio than most insurers generally," he said.
With the proposed state auto insurance system running on a nonprofit basis, Walkup added: "All profits, including investment income, and expense savings (could) be returned to the automobile insureds in the form of lower premiums or policyholder dividends."
On the other hand, Walkup expressed doubt that either private insurers or insurance agents would lend their support to a state company that would represent competition with free enterprise. And, he said, "The potential premium reduction over current levels would be about 10%. This may not seem like enough to some people to justify the change."
When he introduced his bill in January, Polanco said his aim was to reduce huge territorial rate differentials and make auto insurance affordable for nearly everyone. Under the plan as originally introduced, the state company would sell only the required minimum liability insurance at a single rate for each county, no matter where a person lived in it.
But everything else--such as collision and comprehensive coverage--would be left to the private insurers. And anyone desiring to buy liability coverage from a private company instead of the state could continue to do so.