A leading consumer advocate presses an initiative that could compete with a ballot proposal offered by an industry executive.

The Los Angeles Times

SACRAMENTO — California voters may be in for a repeat of the 1988 ballot free-for-all that produced a landmark state insurance law.

Consumer advocate Harvey Rosenfield — author of Proposition 103, the successful 1988 insurance initiative — unveiled Friday a proposed ballot measure crammed with provisions that auto and homeowner insurers would be likely to oppose. The proposal includes limits on dropping homeowners for making claims, a prohibition on the use of credit scores in evaluating potential customers, a ban on fees charged by brokers and increased penalties for violations.

The proposed initiative was filed with the attorney general's office only weeks after the head of one of California's leading auto insurers began pushing his own ballot measure that would rewrite key parts of Proposition 103, which Rosenfield says has saved policyholders more than $23 billion over 17 years.

"This is going to be a catastrophic mistake for the insurance industry if they go forward with this," Rosenfield said, referring to a potential ballot battle that could erupt if George Joseph, chief executive of Los Angeles-based Mercury General Corp, puts a proposal to change Proposition 103 on the November ballot.

In 1988, five ballot measures designed to alter the way auto insurance was priced competed for California voters' attention. After an $80-million battle, Proposition 103 emerged victorious over three proposals from the insurance industry and one from trial lawyers.

The proposition, which made California auto insurance the most regulated in the nation, converted the state insurance commissioner into an elected official and gave the commissioner power to rule on proposed changes in insurance rates. The initiative also declared that auto insurance rates should be based primarily on three factors: driving record, annual miles driven and number of years licensed.

Joseph's proposed initiative, filed in late December, would provide special discounts to some motorists, lower selected rates and make it easier for the state Legislature to change other parts of Proposition 103, including the factors the law requires insurers to use when calculating auto premiums.

Rosenfield and Joseph each would need about 700,000 signatures to ensure that their measures qualify for the November ballot. It's a process that can cost $1 million or more, but both are seen as capable of raising the money and getting their initiatives on the ballot.

"I wouldn't underestimate Rosenfield," said Robert Fellmeth, director of the Center for Public Interest Law at the University of San Diego.

The insurance industry, which hasn't endorsed Joseph's initiative, denounced Rosenfield's proposal, calling it a threat to the industry's ability to do business profitably in California.

"This would force people to pay more for insurance," said Sam Sorich, president of the Assn. of California Insurance Cos.

Joseph did not respond to requests for interviews. But a spokeswoman for his political consultants said Joseph was considering another initiative that would more narrowly amend Proposition 103 by providing for motorists discounts on new policies for motorists had previous coverage.

Rosenfield said such discounts would discriminate against drivers in urban areas who are trying to comply with state law by purchasing first-time liability policies. Last September a California Court of Appeal rejected such discounts in a suit brought by Mercury.

Despite Proposition 103's mandate against using ZIP Codes to set auto premiums, consumer advocates contend that many insurers continue to emphasize where a customer lives when setting rates. As a result, they say, urban drivers tend to pay higher premiums than those living in rural or suburban areas.

Late last year, Insurance Commissioner John Garamendi said he would issue regulations to ensure that Proposition 103's rate-setting mandates were enforced. Insurers contend that Garamendi's proposal would increase premiums for drivers in rural and suburban counties, who make up about 60% of the state's total.