Rate Hike for Risky Drivers Draws Fire

Two state senators were sharply critical of a proposed 50% increase in the rates for assigned-risk auto insurance at a hearing Monday in Los Angeles, but the head of the system told them that a 50% hike is not enough.

Assigned-risk plan manager David E. Kuizenga said some of the 240,000 assigned-risk buyers have such poor driving records and are involved in so many accidents that they could pay thousands of dollars in premiums every year and still cost the insurers money.

But he also told the Senate Insurance Committee hearing chaired by Sen. Alan Robbins (D-Van Nuys) that putting assigned-risk drivers on a pay-as-you-go basis would lead many of them to drop their insurance, thus contributing to the growing uninsured motorist problem.

Kuizenga suggested subsidies from good drivers, through premiums in the regular insurance system, are necessary to keep the assigned-risk system working.

Under the assigned-risk plan, drivers who cannot buy liability coverage from private companies are assigned by Kuizenga’s agency to the private insurers in proportion to each firm’s share of the total auto insurance business. The insurer then collects from them at the assigned-risk rates and pays their losses. If it loses money on the assigned-risk drivers, it often increases the premiums of its regular customers to compensate.

With state Insurance Department hearings scheduled to begin next week in San Francisco on the proposed 50% increase, which would bring assigned-risk rates in some localities for state-required minimum liability coverage to more than $1,000 a year, legislators are concerned about an adverse constituent reaction.

Robbins said that he wants the Legislature to pass a resolution calling for a suspension of all assigned-risk increases until the insurance companies provide more precise data on their losses.

Kuizenga said he is satisfied from the data he has seen that the assigned-risk buyers are being carried, on the average, at a loss.

Sen. Ed Davis (R-Valencia) also expressed exasperation, remarking that auto insurance is getting to be so expensive that if Los Angeles had a good taxi cab system, many persons who don’t have to drive too much would be well advised to sell their cars and take taxis instead.

In an attempt to keep the assigned-risk premiums affordable, the Insurance Department has declined to authorize sharp increases in the last two years. In some inner-city areas the assigned-risk rates--traditionally far higher than privately purchased insurance--are currently lower than private insurance. Some motorists have chosen to enroll in the assigned-risk plan for liability coverage.

According to Kuizenga, companies carrying the assigned-risk policies are spending as much as $1.80 in claims and handling charges for every $1 they collect from assigned-risk buyers.