Bid to Limit Rises in Car Policy Costs Is Promised

SAN DIEGO —  Insurance Commissioner Roxani Gillespie opened five days of hearings on Proposition 103-mandated changes in auto insurance pricing methods here Monday with a pledge to “channel” the law to avoid large rate increases for millions of policyholders.

Gillespie’s pledge may be good news for policyholders in San Diego, the San Joaquin Valley, rural Northern California and the Inland Empire who, under the new law, might have found themselves subsidizing lower prices in Los Angeles and San Francisco. But for policyholders in the largest urban centers, it means there is likely to be little price relief.

Faced with deciding what to do about the present system of basing prices largely on where a policyholder lives, Gillespie indicated that she may direct that the residency factor be applied only on a regional or countywide basis.

“I will try to channel the law to make sure it does more good than harm,” the commissioner said.

As an illustration, Gillespie said that if there is a flat regional rate applied in San Diego and the Inland Empire, the average auto insurance rate would rise by 3% in Imperial County and 2% in San Diego County, but decline by 1% in San Bernardino County and 4% in Riverside County.

If, by contrast, countywide rates were applied, she said the average rate in San Diego County would rise by 14% in La Mesa and 8% in Vista, but decline by 2% in San Diego and 5% in La Jolla.

At a hearing to be held in Los Angeles today, Gillespie may reveal estimates for what the possible alternative systems would do in Los Angeles, Orange and Ventura counties.

Gillespie’s estimates are based on averages, and there could be greater fluctuations in individual rates if either of the new systems were used to replace the present sharp neighborhood-by-neighborhood variations.

Other Factors

Proposition 103 says that a driver’s safety record, miles driven and years of driving experience should be used, in that order, as the most important criteria for setting rates. But it allows Gillespie to employ other factors as well--such as place of residence, marital status, sex and age, as long as they are shown to have an influence on claims costs.

Gillespie declared Monday that to apply this literally and impose a flat rate statewide, rate increases in some areas of up to 60% could result. In only three of the state’s 58 counties--Los Angeles, Orange and San Francisco--would rates go down.

On Monday, as the hearings opened, positions of the various parties had not changed since June, when earlier hearings were held.

Insurance industry representatives warned that doing away with or subverting neighborhood-based pricing would result in enormous price increases for most Californians, and save money only for those who reside in the highly populated counties.

On the other side, Proposition 103 author Harvey Rosenfield charged that Gillespie is engaged in “fraud” and “propaganda” in warning that implementing Proposition 103 could mean large increases for many.

Rosenfield charged that the insurance industry is withholding from Gillespie data about what would happen if the new law’s rating criteria were used, and said she should not make up her mind what to do until the companies provide the data.

Gillespie had a mild response, remarking that she wished Rosenfield would work with her rather than against her. But she did say that she would like more pricing data from the companies.