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Auto Policy Relief: Just a Big Dream? : Prop. 103, still toothless, now faces new danger

August 22, 1995

Six years after California voters approved Proposition 103, the auto insurance rate changes called for by the initiative are still to be delivered. To make matters worse, there is a legislative attempt to roll back 103's provision that premiums be based on drivers' safety records instead of street addresses.

AB 341 will be heard Wednesday by the Assembly Appropriations Committee. The legislation, by Assemblyman David Knowles (R-Placerville), would defy the voters by returning to the insurers too much latitude in rate setting.

Under 103, a driver's record, the number of miles driven per year and the number of years of driving experience are to be given priority over all other factors in setting rates. AB 341 would reverse that, allowing insurers to attach no more weight to drivers' records than any other factor, such as their residential ZIP codes (which favor suburbs and rural areas), marital status and gender.

While AB 341 lays out the order of factors to be considered (the three drivers' safety criteria are the top three), it does not provide weights for each factor. Such a so-called sequential analysis tilts the process in favor of the industry and thus raises the prospect of rates based on where you live rather than how you drive.

DISCOUNT TARGETED: AB 341 also undermines the 20% good driver discount established by 103 and provided for under current regulations. Consumers Union, the publisher of Consumer Reports magazine, explains that the bill would change eligibility for the discount as well as alter how insurers apply it to the premium--all to the disadvantage of consumers.

It is up to the Department of Insurance, not the Legislature, to oversee rate setting. The insurance commissioner's office, both under Chuck Quackenbush and his predecessor, John Garamendi, has been excruciatingly slow in issuing regulations to establish standards for rate setting. Those regulations are suppose to include a weight for each rating factor. Quackenbush's office has said it is on the verge of issuing such regulations, but the commissioner--who received $2.3 million in insurance industry contributions in his campaign for the post--has declared himself neutral on AB 341.

TOOTH AND NAIL: The industry has been battling royally--in court and through administrative hearings--against the changes in the rating factors called for in Proposition 103. It tried to prevent data collection in an 18-month government analysis of 10 million California policies. The December, 1994, report, performed under Garamendi, showed that the insurers were not providing sufficient weight to the number of miles driven and number of years of driving experience in setting their rates. The report also found the sequential analysis methodology flawed.

Clearly AB 341 undermines key elements of Proposition 103, which won the voters' favor because of deep resentment over runaway auto premiums. The Legislature should not be micromanaging the Insurance Department. And Mr. Quackenbush, where are those regulations?

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