Ah, to Be on Prop. 103’s Slow Track

Ms. Roxani Gillespie

California Insurance Commissioner

Sacramento, CA

Dear Roxani:

I’m sure you won’t mind the familiarity since you seem to operate on that basis with the insurance companies too.

I’m writing you about this rollback in insurance rates we voted in last year. You remember; it was called Proposition 103.

Now I know you’re busy checking out California’s automobile insurance companies to find out if they can cut their rates--as the referendum ordered them to do--without going broke. I certainly sympathize with their predicament, which is why I am writing to you.

You probably won’t be able to get to this for a while but I’m in something of a bind too, and when you get through reviewing the problems of all these insurance companies, maybe you can take a quick look at my situation.

You see, it occurred to me that this study you are doing is kind of one-sided. You seem pretty worried about the insurance companies staying solvent, but as far as I know, you aren’t doing any studies on the solvency of the people who buy insurance. If I’m wrong about this, I apologize, but I just haven’t heard any concern expressed about those of us who are footing the bill. Seems to me the same yardsticks should be applied to us too.

As I understand it, you have taken the position that the insurance companies should make at least an 11.2% profit and should be immune from Proposition 103 if they claim that a rollback would push their profits below that figure, which is your interpretation of the state Supreme Court’s “fair rate of return.” You have also said that you are simply trying to use common sense in deciding who has to cut rates and who doesn’t--and that the process is on a “slow track” and will probably take 10 years or so.

In view of these statements, I respectfully request that you exempt me from paying for my car insurance until one of your “slow track” hearings can be held on my case. At that time, I will make the following points, supported by incontrovertible evidence:

1. Paying $1,800 a year for car insurance emphatically pushes me below an 11.2% profit in my personal finances. As a matter of fact, it comes perilously close to pushing me into operating at a deficit.

This situation could worsen dramatically next November when my policy comes up for renewal. You see, during a trip I took this summer, I had my hubcaps ripped off during the night at a motel in Texas. So I filed a claim when I got back--the first one in some years. Now if experience holds true to form, that means my insurance rates will probably go up. Insurance companies with whom I have dealt in the past have loved me as long as I paid my premiums and didn’t upset them by filing claims. When that happened, they showed their irritation by jacking up my rates. I’ve been with my current company for four years without filing a claim, and I don’t want to prejudge it in this matter. But if my rates go up, I will assuredly find myself in a deficit situation which--I’m sure--you would regard as intolerable.

2. You have expressed some concern that the efficient companies are being penalized by Proposition 103 because they are the firms making the largest profit and are therefore most susceptible to the rate rollbacks. The corollary of this would seem to be that you see it as your role to protect inefficiency by making sure that the badly run companies don’t have to deal with the added burden of reduced rates. We will just continue to underwrite their inefficiency with high insurance rates.

Applying this same logic to people, I’m quite prepared to work at being inefficient in order to better merit your help and consideration. I suppose it was inefficient of me not to sit up all night guarding my hubcaps, but I can do much better than that. I can borrow money at extortionate rates, buy things I don’t need, run up my credit cards, be beastly to my creditors--things like that. By the time my hearing rolls around, I’m quite sure I can offer you an adequate inefficiency rating.

3. You have granted Proposition 103 exemptions to 183 small companies doing less than $20 million annually in California business. I’m fully prepared to prove that I do considerably less annual business than $20 million and should therefore be automatically exempted from paying for my car insurance.

The foregoing points will be enlarged on and documented at my hearing, which I understand will be about 10 years down the road, after you finish with the insurance companies that haven’t been exempted. Meanwhile--and I’m sure you will support me on this--I’ll just refer my insurance bills to your office.

If, by any chance, you are no longer in that office after the voters (instead of the insurance companies) have a chance to name the state insurance commissioner, I would much appreciate it if you would pass this letter along to your successor.

Sincerely,

Joseph N. Bell