California drivers to be used as guinea pigs?

SACRAMENTO, Calif.--(BUSINESS WIRE)--Nov. 20, 1995--Insurance Commissioner Chuck Quackenbush wants to use California motorists as guinea pigs by establishing an untested and unneeded new system for setting auto-insurance rates, according to the Association of California Insurance Companies (ACIC).

``It makes no sense for the commissioner to abandon a sound, functional system that complies with Proposition 103 and has been in place for five years with one that will totally disrupt and artificially change the rates drivers pay for their insurance,'' said ACIC President Barry Carmody.

``Commissioner Quackenbush's plan simply will result in a giant cost-shift program with many drivers paying more so others can pay less. The bottom line is that the commissioner will be using California's driving public as guinea pigs in a Draconian economic experiment.''

The commissioner is proposing the new system in the form of regulations, which will be the subject of a public hearing at the Ronald Reagan State Building in Los Angeles at 10 a.m. Dec. 1.

``His proposal would do away with the current system. That system was embraced by his two predecessors -- former commissioners John Garamendi and Roxani Gillespie -- so insurers could charge fair rates based on the cost of providing coverages,'' said Carmody.

By contrast, Quackenbush's scheme would force insurers to base their premiums on certain rating factors that may or may not be significantly related to the cost of the policy. This in turn would unfairly distort the rates and have little relationship to the ultimate cost of the product.

``Ultimately, motorists will be charged inappropriate premiums, which is fundamentally unfair and in violation of the law, which protects drivers against unfair and discriminatory rates. We believe drivers that cost more to insure should pay more. It's that simple, and it's fair,'' said Carmody.

Under Proposition 103, insurers are required by law to base their rates primarily on three factors -- driving record, miles driven and years of experience.

The proposition also gives the commissioner authority to allow insurers to use, but on a smaller scale, other factors in establishing true cost-based rates. These other factors include where a person lives and the type of car insured.

``Over the past five years, California motorists have had predictability in their rates. At the same time, insurers have been able to actively compete on a level playing field -- all because of the existing system.

``If we change that system, some California drivers are going to suffer. The problem is that it may not be the bad drivers,'' said Carmody.

CONTACT: Association of California Insurance Companies

Bill Packer or Brad Stevenson, 916/442-4581