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Quackenbush Assailed on Auto Coverage : Insurance: The commissioner raises rates for drivers in high-risk pool and denies an anti-redlining petition.

March 17, 1995|THOMAS S. MULLIGAN | TIMES STAFF WRITER

In actions that aroused the ire of consumer advocates and municipal officials, Insurance Commissioner Chuck Quackenbush raised rates for the state's high-risk auto insurance pool and denied a petition to immediately impose regulations that would reduce the effect a driver's address has on his or her insurance rates.

Consumer groups and the city and county of Los Angeles last month petitioned Quackenbush to adopt regulations requiring insurers to base auto premiums mainly on drivers' safety records rather than on "territoriality," or ZIP codes, as required by Proposition 103.

They cited an Insurance Department study issued in December--at the end of the term of Quackenbush's predecessor, John Garamendi--concluding that many insurers were violating the 1988 insurance initiative and still weighing ZIP codes too heavily in their rates.

The groups contend that the practice results in unfairly high rates for good drivers who happen to live in inner-city areas considered risky by insurers.

But Quackenbush has denied the petition, saying he would instead hold a series of investigative hearings to review the December study and help him develop his own regulations.

"It's been six years (since Proposition 103 passed) and we're back to holding hearings again?" said Dora Leong, legislative deputy to Los Angeles City Councilman Mark Ridley-Thomas, one of the petitioners. She said the councilman is "concerned and frustrated that there now will be further delay."

In a separate action granting a 5.2% rate hike to the California Automobile Assigned Risk Plan this week, Quackenbush noted that the increase is less than half the 12.8% sought by the industry-backed program.

But a coalition of consumer and civil rights groups criticized the action, saying that as many as two-thirds of the 110,000 motorists in the pool are good drivers who cannot find insurance in the regular market, often because of redlining or sales discrimination.

In effect, the advocates contend, insurers are being allowed to push good drivers into the assigned-risk plan and then reap huge profits by charging them several times what they would pay for a conventional policy. For some categories of coverage, CAARP policies can cost 500% more than those offered in the "voluntary" market.

Quackenbush said the rate hike is justified by evidence of increased claims losses and other costs presented in the department's recent rate hearings.

In interviews Thursday, Quackenbush and aides were skeptical of the contention that two-thirds of CAARP policyholders might meet the definition of good drivers under Proposition 103. However, Milo Pearson, deputy commissioner for rate regulation, acknowledged that the department itself is not sure of the correct figures and promised to investigate.

Under the 1988 initiative, insurers are required to give such drivers their best rates and are barred from refusing them coverage.

Using 1992 figures, the latest available, San Francisco-based Public Advocate said that 96,164 of CAARP's 142,261 policyholders at the time had two or fewer "penalty points" for moving violations or at-fault accidents. (The pool has since shrunk to about 110,000.)

Although the statistics are inconclusive for technical reasons, Public Advocate's Mark Savage said they provide strong evidence that many if not most CAARP policyholders do not belong in the pool. His group and the others contend that the reason those drivers are in CAARP is that they have been denied standard coverage because of redlining.

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