Insurance Fraud, California-Style
Having blamed the private sector for everything from inflation to hair loss, the self-appointed "consumer" groups now have targeted the insurance sector. Accordingly, that industry is being blamed for price growth largely the result of sharp cost increases in medical care, auto repair, litigation, fraud and cross-subsidies.</br></br>With California's passage last fall of its Naderite initiative to roll back auto and other premiums, a bad situation is well on its way to worse.</br></br>"Good drivers" -- a class including those convicted of drunken driving within the previous three years -- were promised a rate reduction of 20%. Territorial rating -- in which rates are based in part upon actuarial (loss) experience in different geographic areas -- was effectively abolished. The office of insurance commissioner was made elective, thus politicizing it. And the law provides that "consumer groups" enjoy permanent employment as paid intervenors in the regulatory process.</br></br>Harvey Rosenfield, the chief promoter of the new regime, now is using data unadjusted for inflation, for other costs, for quality differentials, for types of services provided, or for the market value of capital investment in the industry. That is the only way he can argue that the 20% rollback in rates will not deprive any insurer of a "fair return."</br></br>And Mr. Rosenfield argued during the campaign that Prop. 103 would remove the insurers' "antitrust exemption." In fact, no such exemption existed, and an industry with 4,000 firms could not collude successfully in any event. What Mr. Rosenfield was referring to was the legal right of insurers under the McCarran-Ferguson Act to share actuarial data, thus reducing a significant cost for small firms and so letting them compete. So much for Mr. Rosenfield's great concern for consumers.