Like many Californians in the fast lane, Julie Kulas believes that the good life calls for a sleek and stylish car. So when the Los Angeles banker bought a new auto two years ago, she chose a $20,000 Porsche. That was the easy part. When she went shopping for auto insurance, two companies refused to insure the sports car. Stunned by their rejection, Kulas wound up with a firm that charges $4,600 a year to insure the Porsche and her husband's BMW. Says she: "This is outrageous. We're being penalized just because we have nice cars. We could buy another one for the amount we pay in insurance every year."
The Kulases joined millions of angry fellow travelers earlier this month in a consumer revolt that could roar out of California like a muscle car. By a 51%-to-49% count, the voters approved Proposition 103, which will slash insurance rates to 20% below November 1987 levels. Good drivers will get yet another 20% off. Although the vote covered all types of property and casualty insurance, the auto-premium cuts were the heart of the measure. The most breathless of its proponents expect its impact to rival that of Proposition 13, the 1978 California initiative that set off a coast-to-coast fight against high property taxes. "The genie is out of the bottle," says Harvey Rosenfield, 36, the author of Proposition 103. "This is the taxpayer rebellion of the '80s."
The time may be ripe. Since 1983, auto-insurance premiums have climbed three times as fast as the inflation rate. Among the causes: bad roads, rising medical costs and growing traffic congestion. In New Jersey, where drivers pay the highest average rates in the U.S., a group of consumers pounded a car with a sledgehammer last February to demonstrate their rage. Each state regulates insurance separately, a practice that contributes to wide price differences from place to place. Several Midwestern states have been able to control insurance costs to some degree by passing strong no-fault laws, under which drivers file claims with their own insurers instead of bringing expensive suits against one another.
Yet in dozens of places where premium increases show no sign of slowing, Proposition 103 could become a rallying cry. Robert Hunter, president of the National Insurance Consumer Organization, a Virginia-based group, says he has been "deluged" with calls from drivers eager to have their own states cut rates.
The proving ground is California, where insurance firms are fighting back. Declaring that Proposition 103 would unleash a "wrecking ball" against them, the insurers rushed into court and obtained an order blocking the measure until the state supreme court can decide whether it is constitutional. At least eight auto insurers have already pulled out of California, even though the state's 13.5 million insured drivers account for more than 14% of all U.S. car-insurance business. State Farm Mutual, California's largest auto underwriter, stopped issuing new policies last week and referred new California customers to a subsidiary that charges 20% higher rates.