For almost 29 years, California insurers have uttered the phrase"Proposition 103" like a curse.

The 1988 voter-approvedinitiative forced insurance companies to roll backhome and auto rates by 20 percent and to obtain the approval of anelected commissioner before increasing them.

It also required insurers to set car policy rates basedprimarily on three factors: a driver's safety record, his or heryears of experience behind the wheel and the number of miles drivenannually.

Related: Creating a new playbook for autonomous vehicleclaims

Consumer groups vs. insurers

While consumer groups have cheered the initiative's impact,which they credit with bringing Californians' spending on carinsurance below the national average, insurers say the ratingscheme is illogical and restrictive and unfairly benefits urbandrivers at the expense of rural residents.

"There are all sorts of wonderful things we can do in otherstates that we can't do in California because we're locked in,"Steve Sheffey, corporate counsel at Allstate Insurance Co., toldan Institute for Legal Reform conference in MenloPark in March.

Over three decades, insurance companies have spent millions ofdollars trying to chip away at Prop 103's regulations both throughlitigation and at the ballot box — with little success. Now,however, the industry has found a new source of optimism in adifferent phrase: driverless cars.

Autonomous vehicles' promise of no brake pedals, no steeringwheel and virtually no human error has industry leaders questioningwhether Prop 103's days are numbered. If the car becomes the driverof the future and a passenger's driving skills and experience areno longer relevant to its performance, why should insurers be boundby outdated regulations, they ask.

Related: How self-driving cars will change therules of the road

"What happens when those vehicles are so smart" that theiradvanced safety characteristics become the most significant factorin assessing risk, said Rex Frazier, president of the Personal InsuranceFederation of California, which represents six of the largestinsurers in the state.

Grabbed attention of state lawmakers

The issue grabbed the attention of statelawmakers during a hearing earlier thisyear.

"I don't think these [Society of Automotive Engineers] Level 4and Level 5 vehicles … fall under a strict adherence to Prop 103,"said Senate Insurance Committee chairman Tony Mendoza, D-Artesia."I don't see how they fit."

Southern California lawyer Harvey Rosenfield, the author of Prop103, brushed aside such comments as the premature musings of anindustry and its allies that despise the rate-setting measure.

"What these guys want to do is just get rid of" Prop 103,Rosenfield said. "They hate the whole idea of the public lookinginto their books and having to ask for permission to raise theirrates."

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There is no political effort afoot to change Prop 103,either at the ballot box or in the Legislature, according to ChrisShultz, deputy commissioner of the California Department ofInsurance. (Photo: Jason Doiy/ALM)

In a whitepaper published in March, Rosenfield argued that Prop103 will remain relevant when autonomous vehicles join roadwaysstill dominated by people-driven cars.

"There is … a real danger that insurance companies will pursue anew form of red-lining to favor motorists who can afford moreexpensive cars with sophisticated computer systems and surchargethose who cannot," he wrote. Prop 103's restrictions "will be moreimportant than ever in the new automotive era."

Altering Prop 103 won't be easy

Altering Prop 103 would not be a simple task. Wholesale changes,or repeal, would have to be approved by voters. Alternatively, theLegislature could make changes that "further" the interests pursuedby the initiative. But any insurance industry-backed legislativeeffort would be fought by consumer groups, including Rosenfield'sConsumer Watchdog, and invite litigation.

Other government agencies are starting to confront questionsabout insurance.

Michigan last year adopted self-drivingregulations that require companies to comply with thestate's no-fault insurance laws. In the United Kingdom,regulators are considering a dual insurancesystem where owners of self-driving cars would have tocarry policies covering them when they are driving and when theircars are in autonomous mode.

California has a $5 million insurance requirement formanufacturers that are testing driverless cars. What happens whenautonomous vehicles move into operational mode is not clear.

"There's an old saying that insurance is the oxygen of the freeenterprise system," Sheffey, the Allstate lawyer, said at theInstitute for Legal Reform conference. "No one is going to takerisks if they don't have insurance. We're not going to be able toadapt as quickly as we need to unless these [California] insuranceregulations are changed and repealed in some cases to allowinsurance companies to innovate."

'Insurance will be available'

Chris Shultz, deputy commissioner of the California Departmentof Insurance, told lawmakers earlier this year that the state doesnot need an immediate change to Proposition 103 to ensureautonomous vehicles have coverage. He noted that companies movedquickly to offer specialized policies for ride-hailing drivers whenUber and Lyft surged in popularity.

Related: Feds outline plans to regulate autonomouscars

"We've been asking all the stakeholders whether there's animmediate need to change either the laws or the regulations inorder to insure autonomous vehicles," Shultz told the SenateInsurance Committee. "And the initial answer is, we do not thinkthere's a need. If a manufacturer offers a [self-driving] vehiclefor sale tomorrow, insurance will be available."

Frazier said there is no political effort afoot to change Prop103, either at the ballot box or in the Legislature. Of moreimmediate interest to insurers is trying to ensure they can accessdata generated by self-driving cars to assessliability. That priority could change, however, if an autonomousvehicle developer hits the market with a popular product.

"When it becomes obvious that something has captured thepublic's imagination, the Legislature can move quickly," Fraziersaid.