A tale of two sovereigns
Legend has it that, one fine 11th century day, resplendent in royal finery as he stood by the shore, he remarkably issued a command to the tide. He said:
I command you therefore not to rise onto my land.
But, the tide did not heed Canute. Disobediently, the sea disregarded Canute’s admonition, did as it would and rose anyway. Canute responded by announcing to those present:
Let all men know how empty and worthless is the power of kings…
Nine centuries later, the voters of California, invested with collective sovereignty, decided that they would, as much as possible, take direct control over automobile-insurance pricing. Toward that end, through the power of Proposition 103, they commanded insurance rates not to rise in their land. Bolder than King Canute, they even commanded insurance rates to go down! Unlike Canute, however, they set up a huge engineering organization and a system of regulatory dams and dykes to control the flow and rise of prices.
Nearly 30 years later, has the power of the second sovereign been any more noteworthy than the power of the first? No, not really. As outlined in my study entitled “The troublesome legacy of Prop 103,” the measure has expanded the regulatory bureaucracy and associated costs of doing business in California, while doing nothing to reduce insurance fraud or insurance rates. Instead of saving California consumers money, it has yielded only dramatic growth in the regulatory purview of the California Department of Insurance, at immense cost to taxpayers and premium-payers alike.
Yet, the legacy of Prop 103 remains confused. The initiative was passed Nov. 8, 1988. By coincidence, it so happens that Nov. 6 marks the feast of St. Illtyd, the 5th century Welsh abbot who is celebrated for accomplishing what King Canute could not.
Illtyd marched to the shore, drew a line in the sand and prayed for the tide not to wash across his line. Through what has been recorded by church officials as a miracle, Illtyd’s prayer was answered and the tide never crossed the line.
Advocates of Prop 103 have declared the law’s value based upon a similar premise. They claim the mantle of Illtyd, instead of their earned status as inheritors of the legacy of Canute. Like the tide, the underlying activity of markets, the costs that drive them, are immured to the pronouncements of kings and regulators alike. That Canute was frustrated and Illtyd exalted had everything to do with the tide and nothing to do with their pronouncements. But where luck failed to smile upon Canute, it elevated Illtyd to sainthood.
So, too, has it been with the authors of Prop 103. They passed their ballot initiative at a time when insurance cost drivers were ebbing from a high tide and have been able to claim with considerable success the credit for stabilized and reduced auto insurance premiums, in spite of no clear academic consensus to support that claim.
Ultimately, between sovereigns, has the power of the people of California been any more noteworthy in its ability to control insurance rates than was King Canute in his effort to command the tide to stop rising? Yes, but only insofar as the lesson learned by King Canute was less time-consuming and less expensive than the second sovereign’s ongoing effort.