Reforms needed for troublesome Prop 103
“Passed in 1998 ostensibly to help control insurance rates and protect consumers, Prop 103 has instead helped California’s auto insurance rates remain among the highest in the nation,” wrote author Ian Adams, R Street’s California state director and senior fellow.
Adams cites Illinois as a state with a consumer-friendly auto insurance regime, which evolved out of the sunset of previous legislation that contributed to an onerous environment. After the law expired, Illinois pushed forward with a mission to liberalize regulation to ensure appropriate oversight and foster competition.
Recognizing that overhauling the system would be a daunting task, Adams lays out shorter-term goals that could be achieved more easily, such as rationalizing the power of intervenors, individuals or consumer groups who slow rate filings from coming to market and are compensated by the California Department of Insurance.
“Requiring that intervenors must bring a novel position to a rate hearing would improve the speed with which rate filings are resolved and address a significant barrier to market participation,” Adams wrote.
Adams also lays out other changes, such as modifying “persistency” requirements to make it easier for companies to lure customers away from other insurers, thus increasing competition in the market.
“It is important to make Prop 103 work for the public,” wrote Adams. “That means looking to other states for clues about elements of the California system that are obviously dysfunctional. The very structure of Prop 103 is to force rates to be in excess of what they could be under another system.”