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All sides agreed that California's car premiums have careered out of control. Insurers, who blamed runaway medical expenses and repair bills, also accused the state's trial lawyers of persuading clients to bring unnecessary suits. Consumer activists replied that insurers were still making healthy profits in the state and noted that companies were able to spend $70 million to fight Proposition 103 and promote alternatives on the ballot. (The measure's sponsors, led by Rosenfield and consumer advocate Ralph Nader, spent $2.3 million to get it passed.)
In New Jersey, which has the highest traffic density in the U.S., motorists were stunned last summer to learn that state-imposed surcharges had increased their car premiums by some 20%. The sudden increase reflected the state's need to bail out a fund that insures high-risk motorists and has fallen $2 billion in debt. While New Jersey lawmakers toughened the state's no-fault insurance laws, they remain too weak to prevent motorists from bringing costly lawsuits.
Massachusetts, another high-premium state, is trying to give drivers a break. A week before the vote in California, Massachusetts legislators approved a reform bill that will slice 16% off the state's tightly controlled auto rates in 1989. Aimed at easing a 27% jump in premiums over the past two years, the measure includes several cost-saving features to placate insurers. Yet such provisions could not halt a continuing exodus that has seen six major firms abandon the state since 1986. Allstate joined their ranks last week, when the Sears subsidiary said it would stop selling policies in Massachusetts to escape the state's stringent regulations.
Many car owners are responding to high insurance rates in risky ways. While most states require motorists to have policies, a growing number of drivers are hitting the road -- and each other -- without insurance. In Florida's Dade County, which includes Miami, more than 50% of all motorists have no coverage, according to state officials.
The rural and industrial heartland could prove resistant to an insurance revolt. Cushioned by strong no-fault plans in some states and, frequently, less crowded highways, Midwesterners have among the lowest auto premiums in the country. Even motorists in such cities as Cleveland and Chicago have lower rates than their counterparts elsewhere. Chicago has extensive mass transit, for one thing, and the city's drivers tend to file fewer lawsuits than drivers in Boston or Los Angeles.
The California insurance quake may soon draw the attention of Washington lawmakers. While virtually no politician wants the Federal Government to regulate insurance, a broad coalition of consumer and other groups has urged Congress to end an antitrust exemption that insurers have enjoyed since 1945. The groups say the repeal would promote competition and drive down rates. So far, the industry has easily turned back the challenge. "Auto-insurance prices are driven by underlying costs," argues David Farmer, vice president for federal affairs of the Alliance of American Insurers. Removing the exemption, he says, will do nothing to cut hospital bills or stop people from suing.