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Accord Reached on Bill to Control Insurance Rates

November 10, 1987|MARK GLADSTONE | Times Staff Writer

SACRAMENTO — Faced with the threat of two consumer-oriented ballot initiatives to overhaul and lower insurance rates, the insurance industry and several consumer groups on Monday announced an agreement on legislation to control insurance rates.

Supporters said the bill would affect automobile, homeowners, liability and property insurance premiums but not health and life insurance.

At a Capitol press conference, Atty. Gen. John Van de Kamp--who helped bring together the parties--declared: "If this agreement is enacted into law . . . it will let some sunshine into the rate-making process; it will hold insurance companies accountable for their rates; and it will give the state broad regulatory powers to protect the rights of consumers."

Van de Kamp urged the Legislature to swiftly enact a bill implementing the agreement this week while it is in special session to handle relief for victims of the recent earthquakes in Los Angeles and Orange counties. "The potential of this (compromise) holding together diminishes as we get toward the first of the year," Van de Kamp said, citing the need for initiative supporters to begin gathering signatures to get their proposals on the ballot.

Legislative Uncertainty

But late Monday, it was unclear whether legislative leaders would call the Legislature into a simultaneous regular session or wait until January to consider the proposal. Robert Forsythe, press secretary for Senate President Pro Tem David A. Roberti, said Roberti was "not inclined to call (the Senate) into regular session to deal with the insurance question."

Kevin Brett, Gov. George Deukmejian's press secretary, said the governor has just begun to review the proposal and has no position on it.

Some consumer advocates object to the way the deal was hammered out in private bargaining sessions and expressed opposition to the bill that would implement the agreement. Some insurance industry executives complained that they have not had an adequate opportunity to review the proposal.

The bill would require insurance companies to file their rates with the Department of Insurance and would allow for public hearings.

Rate Rejection Power

The key provision would establish a "flex-rating" system under which the state Insurance Department would have the right in advance to reject annual rate increases exceeding 15% for personal insurance, including automobiles, and 25% for commercial insurance for small and medium-size businesses. (Currently rate increases are running 8% to 30% on auto insurance, according to an industry lobbyist.)

While the bill is supported by Common Cause and the Insurance Consumer Action Network, it is opposed by Consumers Union, other consumer groups and Los Angeles County Supervisor Kenneth Hahn.

Harry M. Snyder, West Coast director of Consumers Union, said his group opposes the bill because it "does nothing for auto insurance rates and you can't call something insurance reform if it doesn't . . . lower automobile premiums."

Snyder said Consumers Union plans to decide by Friday whether to mount a drive to collect signatures for an initiative that, among other things, would seek to lower auto insurance costs. Hahn is seeking another ballot initiative that, in part, would bar neighborhood price differentials on auto insurance.

Monday's press conference capped weeks of private bargaining sessions between prominent insurance lobbyists and consumer advocates, including Snyder. They were modeled after a series of meetings held last summer between business, insurance and legal lobbies that resulted in passage by the Legislature, on the last night of the session, of a package of "tort reforms."

The latest agreement was signed by Stanley R. Zax, president of the Assn. of California Insurance Companies, and representatives of Common Cause and the Insurance Consumer Action Network.

Both parties to the agreement acknowledged that it would not lower auto insurance rates. At the press conference, Zax said: "This agreement is not an indication that we believe that insurance rate regulation will drive down insurance premiums."

Assemblyman Pat Johnston (D-Stockton), chairman of the Assembly Finance and Insurance Committee, acknowledged that auto insurance rates "will probably continue to go up." Nevertheless, he said, the agreement is "a first step, an important one," in revising state insurance laws.

The bill will be carried by Assemblyman Lloyd G. Connelly (D-Sacramento), who unsuccessfully sought similar legislation earlier this year.

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