Wire Editorial 


The future of rate levels for auto insurance in California is currently involved in a tug-of-war. Not a surprising legacy of Prop. 103.

The California Department of Insurance continues to report that automobile rates are declining in the state. Consumer groups argue that the commissioner is poised, as the Prop. 103 Enforcement Project said after CDI hearings in Los Angeles, to "let insurers raise premiums at will."

The Project maintains that "insurance companies have resisted the regulations since their inception, because they constrain insurers' ability to raise rates and charge discriminatory rates."

Consumers Union wants Quackenbush to implement rate approval regulations originally drafted by Commissioner Garamendi. The American Insurance Association says use of generic rate-making in California would be a "regulatory nightmare." (Underwriters Report, March 6.)

"History demonstrates that interfering with price regulation in a functioning, competitive market has significant risks in terms of protecting the welfare of consumers," AIA said in testimony to CDI.

The National Association of Independent Insurers, in testimony at a CDI investigatory hearing this week on "appropriate methodology for review of rate applications," held that the commissioner should select a method of rate review that is flexible enough to recognize the unique characteristics of various lines of insurance, types of insurance companies and the risks insured.

"We believe that the generic 'one size fits all' approach proposed in the existing regulations will lead to regulatory inflexibility that will impede the competitive market," NAII said.

"The essence of the existing generic price regulations conflicts with Prop. 103's stated purpose of encouraging a competitive insurance market," NAII added. (More details next week.)

What was apparent at the outset of Prop. 103 remains a constant. Organized consumer groups see insurance as a utility. Consumer groups want utility-type regulation -- a statewide rate -- and their failure to grasp the essence of the insurance transaction remains at the base of the ongoing conflict over rate regulation.

Issue of March 13, 1997
Copyright © 1997 by Underwriters' Report, Inc.

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