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Voting on Auto Insurance Initiatives

October 15, 1988

There are a number of misstatements made by J. Robert Hunter that sorely need correcting ("Consumer Approach to Insurance," Op-Ed Page, Oct. 5).

Insurance companies are only exempt from federal anti-trust laws to the extent that state law regulates them. California law prohibits price fixing. There are over 400 companies authorized to write auto insurance in California. A recent study by the California Department of Insurance showed a great diversity of auto insurance rates charged by various companies in the state. There is a great deal of competition.

It is true that California does not require rates to be approved by the insurance commissioner. However, even though California ranks third in highest auto insurance rates in the U.S., of the other top 20 states with highest insurance rates 16 do require prior approval. Therefore, requiring approval by the commissioner will not keep rates down.

Hunter uses strange accounting methods to come up with excess profits by insurance companies. All major studies agree that the insurance companies are making no more profits than any other business. In the last five years the top 10 auto insurers in California averaged a 10% return.

As far as legislation is concerned, the Legislature was on the verge of passing a no-fault insurance law last year, but could not do so because of the strong trial lawyer lobby.

The problem with Proposition 100 that Hunter supports, is that it does not attack the real cause of high auto insurance rates, the climbing losses that have to be paid by the companies. All Proposition 100 does is to give discounts to good drivers so that one-third of the drivers will get lower rates, but those savings must be made up by the other two-thirds of the drivers whose premiums will have to go up.

The idea behind this whole insurance initiative mess is to reduce overall auto insurance premiums. Proposition 100 will not accomplish this. It does prohibit trial attorneys' contingency fees from being regulated, however. It is gratifying to see that Hunter recognizes that Proposition 103 is unworkable.

It is strange that Hunter, who is president of the National Insurance Consumer Organization, downgrades the one so-called consumer initiative on the ballot and urges a yes vote for the initiative sponsored by the trial attorneys.

I wonder where Hunter's organization gets its financial support?

HARRY D. BOYD

Van Nuys

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