Yes on 100, No on 103

Eight consumer organizations that see the chances for insurance reform slipping away have urged voters to cast their ballots on Nov. 8 for both Proposition 100 and Proposition 103, the two pro-consumer initiatives. Their concern is that if voters desperate for relief from climbing insurance bills opt for just one initiative, the pro-consumer vote will be split and nothing will pass.

Tactically, in the short run, the advice from Consumers Union, Common Cause, the Urban League and five other groups may make some sense. If none of the five insurance initiatives on the ballot win--a possibility, according to some polls--then the insurance industry will emergethe victor in this multimillion-dollar campaign. The insurers will have succeeded in preserving the status quo, in warding off any attempt to subject its internal operations and its balance sheets to the scrutiny of state regulators and the general public. By lavishing record contributions on members of the Legislature--no other single interest in California matches the insurers’ generosity--the insurance industry has managed to stymie legislative reform. If all these initiatives fail, the chances are that the industry will continue to use its leverage over the Legislature to block all attempts to control its rates or monitorits profits.

Yet, much as we want the insurance industry called to account, we cannot recommend Yes votes on both Proposition 100 and Proposition 103. Voting for both would be a bit like bigamy; whatever the attractions of having more than one spouse, the law says that you must choose. On initiatives, nothing explicitly prohibits an individual from voting for more than one on the same subject. But the state Constitution makes it clear that when two or more conflicting propositions pass, the one that garners the highest vote goes into effect; only the provisions of the other measures that do not directly contradict the top vote-getter become law.

While both Proposition 100 and Proposition 103 are basically pro-consumer measures designed to subject the insurance industry to needed scrutiny and roll back premiums, there are enough differences between them that they could not co-exist if both passed. And, when the two are compared point by point, it becomes clear that Proposition 100 is by far the stronger, the one that would be most likely to bring down premiums without driving the insurance companies to the brink of insolvency, the one that could withstand the court challenges that the insurers are preparing. In legalese, it is said to be “bulletproof.”

Proposition 100 has been unfairly and inaccurately panned as “the trial lawyers’ initiative”; the insurers, recognizing that many people love nothing more than to hate lawyers, have given 100 that tag. In fact, it was co-written by Steven Miller, a consumer advocate, and aides to Atty. Gen. John K. Van de Kamp and Assemblyman Lloyd G. Connelly (D-Sacramento). The California Trial Lawyers Assn. signed on late in the process, though since has provided the bulk of the financial support.

What appeals most about Proposition 100 is that it would establish a state regulatory system that would end forever the insurers’ high-handed tactics. For good drivers it would provide an immediate 20% rollback from the rates in effect last Jan. 1. All future rate increases would be filed with the insurance commissioner, who would have to approve in advance any increase of more than 7 1/2%. The companies would be called on to justify their increases, both by the commissioner and by a newly established insurance consumer advocate in the attorney general’s office. Their rates would be accessible, via computer, to consumers, permitting easy comparison shopping and spurring competition.

Proposition 103 leads in the polls because it has been blessed by consumer advocate Ralph Nader and because it promises the deepest rate rollbacks. It calls for rates in all lines of insurance to be rolled back to levels in effect a year ago, then slashed another 20% and frozen at that level for a year; after that, good drivers would be assured a 20% discount. It sounds too good to be true, and probably it is. Insurance Commissioner Roxani Gillespie has already announced that, if Proposition 103 passes, she suspects that several of the major insurers, especially those that are already the most efficient and gouge the least, would become insolvent; she would then have to exempt them from the rollbacks, as 103 allows. And, if she doesn’t let the insurers off the hook, we fear that the courts will; the insurers will have a persuasive argument that the rollbacks are confiscatory.

As far as regulation is concerned, Proposition 103 would create a nightmare. It would require advance approval from the commissioner for all rate increases (though some could go into effect if unchallenged for 60 days), but does not spell out the criteria that the commissioner should use. That is typical of this loosely drafted measure: Much is left to the commissioner’s discretion.

We are troubled, too, by Proposition 103’s call for an elected instead of an appointed insurance commissioner. In theory, what could be more democratic? In practice, it might mean that the insurance companies, with their lavish campaign chests, will control every race for insurance commissioner just as they control the Legislature now. And the commissioner’s post might become a very visible stepping stone for every politician gunning for the governor’s job--not the sort of person who should be entrusted with a task as technical as setting insurance rates.

As we have said before, neither Proposition 100 nor Proposition 103 is perfect. Most conspicuously, neither would do anything to control the explosion in personal-injury lawsuits or the costs to the insurers of sometimes overly generous jury awards. If either passes, we would expect the Legislature to come back into session and consider no-fault insurance or some other cost-saving device; the insurers, faced with rate rollbacks in these propositions, will be clamoring for further action.

But if it is Proposition 100 that passes instead of Proposition 103, the Legislature will be building on a sounder foundation. Proposition 100 offers a coherent regulation system, one that can tame the insurance industry without putting insurers out of business, one that is likely to produce lasting savings for California’s motorists. Vote Yes on Proposition 100, No on Proposition 103.