News Scrapbook 1988

San Diego, Cali~. ( San Di go Col S I DIE,0 T1lIBUNE

AUG 1 198&

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Insurance .(\ for autos: 'Z) Too costly? Public floored by rates among highe, t in V. · By Rita Calvano Tribune ·1.,11 l+nltr First of two parts Cahforma's 18~2 m1lhon drivers. fru trated by an in. urance industry that ha raised rate almost 70 per- cent m five y ars, want relief from kyrocketmg premiums. In uranct: company officials say the rate hikes reflect the tncrca ed cost of doing bu mess. But con um r advocate ay the mdu try raises mo t price at will, operate in relative secrecy, bases c rtarn premiums largely on stereo- type · rather than real people, and answer to almost no one. Sav A .. emblvman Richard Po- lanco, D-Lo Angeles, an insurance reform advocate· ''I've reviewed let- ter from all over the state of Cali- forma, from people of all walks of ltfe. all political affihattons and in- com levels, saying that their auto- mobile in. urance rate. are too high, that they continue to go up, and there's no r medy at Uus point in ti me to lower ratc " Latest available statistics show the state's average annual premium of $568 in 1986 was third-highest in the nation, surpassed only by New J erscy's $604 and Alaska·s $602 . A few years ago, bu mes es and local governments revolted against the nsmg costs of commercial liabil- . ity insurance,• and obstetricians balked at their ever-increasing mal- practice-insurance rates. Now the cns1s 1s m auto insurance, a problem acknow!edged by the m- surance industry itself, but which generally blames consumers, ~rial lawyers, rising crime and medical- care costs for the skyrocketing premiums. Bruce Norman, marketing vice president for Mercury Casualty Co. Inc of Los Angeles, says the reason rates have gone up is simply because the cost of providing insurance has gone up. Please see PREMIUMS: A-8, Col. 1

; < PREMIUMS: Insurance industry denies consum~rJoci'jj:accusatio.n$ Continued From Pa~e 1 9-. ., 1 ( Alhance of American' insurers, said Insurers. "The number of uninsured complain they!ve been ·driving for motorists is higher in central Los An- )he past 10 to 15 years with no acci- geles; the incidence of theft and ,. aents, and now receive notice of ... fraud is much higher than other cancellation because a computer urban areas." printout shows they're due for an ac- "That includes incre~ses in medi- Californians spend $8.6 billion a year cal costs, increases in the frequency on auto insurance coverage in a state in which mJunes are alleged and the whose average rates continue to frequency with which people litigate climb.

about c/riving rates up

an,ce Committee, said: "Essentially, a gridlock between the lawyers and the insurance companies is blocking the opportunity for the public to se~ good legislation passed." :· · ., I But critics also blame the Legisla~ ture itself, saying many of the state's· elected officials rely so heavily on campaign contributions from the in- surance industry that unless cam- paign reforms are instituted first, ob- taining insurance reform through legislative means is impossible. The insurance industry, which in- cludes all forms of protection, was the biggest campaign contributor in the state Legislature in 1987, spend- ing $417,250, said Walter Zelman, ex~ ecutive director of Common Cause.' · Trial lawyers tollowecL with $284,150,: , he said. . : Recipients sometimes include those legislators involved in insur-: ance reform, Zelman said. : The consumer organizations most; active in insurance reform are for-; bidden by their charters to give cam-· paign contributions, he said. : ' Says Wiebe of the Alliance of; American Insurers: "The insurance, industry employs about 250,000 per~ sons. We sell billions of dollars worth; of products every year in this state,: and we're regulated by the state o~ California. So of course we're goin~ to lobby." ' Not intending to wait for legisla~ live-gridlock to unlock, consumers; the insurance industry and trial law, yers now are taking matters into their own hands, sponsoring five in~ surance-reform initiatives on the No; vember ballot. ~ .

great insurance debate, it appears that most waut changes of the trpe that probably must come throngh public regulation. ·,-= , But that's difficu1t to come by. For more than a decade, the state Legis- lature has resisted reform and thfre- by failed to provide relief. In th~ past two years alone, an estimated 50 bills dealing with insurance reform that were introduced in the Legislature have died. Those bills covered a multitude of possible reforms, including rate re- ductions, changes in the way rates are determined, mandatory state ap- proval of rates, and no-fault protee:, tion whereby aii1!1div!aual's own in- surance company pays up regardless of fault. Unsuccessful proposals also have been made to include the auto insur- ance industry under st.ate antitrust laws to prohibit any alleged price- fixing and require more openness in the reporting of business practices. "California is one of only five states~ the nation that has no super- vision or ability to control insurance rates or practices," said Harvey Rosenfield, director of Access to Jus- tice, a Los Angeles consumer group. "As a result, there's no way for the government or the public to know what the appropriate auto rates are, much less for consumers to figure out from agent to agent what the companies are offering," he said. The state Department of Insur- ance has the authority to stop a com- pany from charging a rate if the price is found excessive or inade- quate but rarely uses its power, Rosenfield said. In explaining the legislative standstill, Sheldon Davidow, chief consultant to the state Senate Insur-

According to the A.M. Best Co. of New Jersey, a prominent insurance- rating business, California's average premium bas risen 69 percent be- tween 1981 and 1986, which are Best's In 1986, the nationwide average annual premium was $440.58, more than $127 cheaper than the premium in California, Best figures show. The prices are out of reach for millions of Californians who simply go without insurance despite risking suspension of their driver's license if unable to prove financial responsibil- ity for an accident they might cause. The proof may be either through lia- bility insurance coverage or a $35,000 cash deposit in a bank trust fund. The Depar_!..ment o! Me,01:..,.Vehicles estimates t5at 20 percent oi the state's 23.4 million registered vehi- cles are not insured. The estimates other records where proof of finan- cial responsibility would be required. Assemblywoman Maxine Waters, D-Los Angeles, says that because in- surance is so costly, "we have a lot of uninsured motorists who have decid- ed they'll buy food instead uf insur- ance, and then put everyone else at Sometimes, just getting coverage Most companies refuse to sell in most recent figures. risk." can be difficult.

their claims," Norman said. Some statistics bear him out. • Tne California Highway Patrol says auto thefts rn California rose 11 percent between 1986 and 1987. San Diego County ranked second only to Los Angeles m the number of thefts in 1987 31,306 compared to 23,102 in 1986, an increa e of 35.5 percent. • The California Medical Associa- lion says the t:ost of medical care in California jumped 21 percent be- tween 1982 and 1986. Nationwide, the increase wa 31 percent. • The Western Insurance Informa- tion Service reports lawsuits filed in motor-vehicle accidents in Californi.i dunng the 1985-86 fiscal year rose nearly 29 percent over the previous year Los Angeles County ranked highest m the.number of suits; San Lawrence Grassini, president of Diego was 15th. statewide organization, accuses the insurance industry itself of prompt- ing many of those lawsuits. Compa- nies often refuse to promptly settle claims, he said, forcing these suits because California law requires them to be filed within one year of Citing a report by the insurance company of a nationwide $13.7 billion after-taxes profit in 1987, Grassini said, "You have to wonder whether the accident. the Los-t;~et!~i;l ciahon, an r of the

cident," Assemblyman Polanco com- Along with frustrated older driv- ers are families with drivers under Deavon and Richard Badami of El Cajon say they pay $3,500 a year for a policy covering themselves and their three driving-age sons. Mrs. Ba- dami says the rate is exorbitant: Based on risk factors having little to do with their own good driving records, the entire family is penal- ized because the couple's three sons are all under 25 and one has had an accident, Mrs. Badami said. Nation- • wide, male drivers under 25 cause a disproportionate share of accidents. "I think that young people should not be penalized simply because of their age," Mrs. Badami said, adding that two of her sons have no marks plained. 25. Other forms of alleged discrimina- lion were pointed out in 1986 by con- sumer advocate Robert Hunter who studied California's insurance iiidus- try for the state Assembly. For example, Hunter found that one major California insurer dis- criminated against low-paid less-ed- ucated people. People holdi;g presti- gious jobs and having a high level of education who also drove "high-risk cars (sports cars)" received lower rates more often than those driving the same kind of car but having less education and less prestigious em- ployment, Hunter said. Another company he said would not insure unrelated individ~als liv- ing together under certain circum- Consumer advocates argue that driving record and distances driven should be what determines rates. Whatever side people are on in the stances. against them.

But consumer advocate James Wheaton accuses the industry of ra- cial discrimination and of mixing ap- ples and oranges when discussing in- "The insurance companies have apparently decided that black people who live in poor neighborhoods are more likely to cause accidents," he "The only thing that matters for liability rates is how likely is it that this ~,riv~r · going o cau e_an acci- dent, said Wheaton of Pubhc Advo- cates in San Francisco, a branch of the Univ~i_!y of San Diego's Center for Public Interest Law. insurance Cali ornia drivers must 1s the msurance drivers buy to cover legal obligations to other people in case of an accident. Insurance rates are calculated on a co_mplicated statistical system in- volvmg not only place of residence (called territorial rating), but also such other "risk factors" as driving record and where a vehicle is surance costs. sa1d. Liabili overage - the type of have - Marital status, age, occupation and amount of education also may be included in dete~ining the ~keli- hoD? of dnv~rs bemg mvolved m an accident, which insurers then use to decide who should be offered insur- Bas1~lly, the who!~ ~ur~ of want each group to pay its fair share of proJected losses and expenses. No more and no less," said one actuary, wbo requested anonymity. . But those arguing for reform say the . system p~ishes good dri~ers havmg the IDISfortune to fall rnto "We have seniors (old people) who segregating these statistics 1s '!{e high-risk categories. parke~. . an~e ~d at what price.

1 ~ 1 ~~A~ are based on OMV a~ident and

certain sections of California, the they're really givmg the public the • most notable being in parts of Los true facts." 1 .Angeles, where insurance offices are But Tim Dove of the Insurance In- nearly non-existent, according to a formation Institute in San Francisco survey done by the state Department says autoJ iability is a losing line of of Insurance. msurance. ---...:.... "Insurance is difficult tp find in "For every dollar we brought in central Los Angeles because custom- nationwide in 1986, we paid almost ers are difficult to find customers $1.18," Dove said. who can afford that pr~uct," said Richard Wiebe, spokesman for the Wiebe of the Alliance of American

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Tomorrow: A look at the ballot measures.

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San Diego, CA (San Diego Co.) San Diego Union (Cir. D. 217,089) (Cir. S. 341,840) AUG 1 1988

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Est. 18&8 ,,, They want to teach lawyers to settle cases out of courtroom · · train future lawyers in resolving both sides to leave the table feeli?g ~J1i'!1r~~~e cott-Bla1r neighborhood and other legal ~he ?u~come is fair, S~iege~man said. , • • dis utes through mediation instead This IS not true of htigation where When Judge Wapner s telev1s1on ff ti t' the bottom line is how much you can sidekick urges people to "go to O I g~ 100 · . win." court" if they have a dispute with a Th~ idea, say Motley a nd Sp~~gel- Alternate methods of conflict reso- neighbor, he's giving out bad advice, man, IS to te~ch law_stnd en~ a bed- Jution are not new to the nation's law according to two professors at the side manner th at wil~ get disputants schools. The l,lniversity of San Diego California Western School of Law. talking toge th er to fm d a soluti_cn, bas a dispute resolution clinic tn The courts are already overcrowd- contrary to th e custom of keepmg which lawyers and Jay people are ed and there is too much contention them far apart so only the lawyers trained as mediators. in legal proceedings and conflict that interact. But Motley and Spiegelman say may not be nec~ary, say law pro- "Most lawyers," said S~iegelma~, that few law schools have gone as far fessors Janet Motley and Paul J. "would be terrified of the idea of ch- as Cal Western in formalizing stu- Spiegelman. ents talking to each o~her about tb~ir dent training to include up to 10 units To prove it, they are working to differences, ,?ut th at is what we will in mediation among the 88 units develop an unusual clinic, linking the be teaching. . . . . f I p 4 campus and city government, to The bottom !me of mediation 1s or See Sett e on age • ~L- -----