Auto Insurer’s Prop. 17 Motives Are Questioned
Filed under: Car Insurance News
Critics: Some Drivers May Face Surcharge
SACRAMENTO, CA — The insurance company that placed Proposition 17 on the June ballot says it did so to save money for most policyholders. The consumer-advocacy groups opposing it say that’s merely a smoke screen.
What the company, Mercury Insurance, really wants is to undermine a provision of a voter-approved insurance initiative passed in 1988, said Harvey Rosenfield, founder of the Santa Monica-based group Consumer Watchdog. That would allow it to assess a surcharge on drivers who seek to restart auto insurance coverage after dropping it temporarily.
He urged voters to apply a simple test when deciding how to vote on the initiative.
“The question voters will ask themselves is, ‘Since when has an insurance company spent millions of dollars to save me money?’” Rosenfield said.
The Yes on 17 campaign has been bankrolled by Mercury Insurance, the third largest auto insurer in the state. Its parent company, Los Angeles- based Mercury General Corp., had poured $10 million into the campaign as of May 13, nearly all the money supporting the initiative.
Mercury Insurance officials declined to say why the company introduced Proposition 17. Instead, a spokesman issued a written statement that mirrored the ballot arguments in the pamphlet sent to voters, saying the company intends to fix what it describes as a flaw in state insurance law.
“The 80 percent of responsible drivers who maintain automobile insurance should not be penalized and lose their discount just because they change insurance companies,” wrote Coby King, a Mercury spokesman.
The proposal would have two main effects. One would allow insurance companies to award discounts to drivers who have a record of maintaining auto insurance without a lapse in coverage, regardless of whether they switched companies. Under current law, drivers who maintain auto coverage with one insurance company are eligible for the continuous coverage discount — rewarding them for their loyalty — but companies cannot penalize those who previously allowed their auto coverage to lapse.
Mercury Insurance says it wants to make that discount “portable” and thus spread the benefit. In the ballot arguments, the initiative’s supporters wrote that drivers who maintain continuous coverage could enjoy discounts as large as $250 a year.
Opponents say insurance companies would make up for those discounts by imposing a surcharge on other drivers.
They say Proposition 17’s second effect would be the ability to charge a fee on anyone who had a lapse in auto insurance coverage for more than 90 days, whether it was because of illness, unemployment or military service within the country. Military personnel who served abroad would be exempt from the surcharge.
“If an insurer offers a continuous discount for some drivers, it will result in a surcharge for other drivers,” the state Department of Insurance wrote in an analysis of the initiative.
The remaining 20 percent of customers would be levied a surcharge of up to $1,000 to make up the difference, said Mark Savage, senior attorney at Consumers Union, the nonprofit group that publishes Consumer Reports. It’s not clear whether such a surcharge would be assessed once or over a period of years.
In tough economic times, some drivers stop using their cars and drop coverage to save money, Savage said.
The practice of basing insurance rates on a driver’s history of coverage was outlawed 1988, when voters passed Proposition 103. At the time, insurance companies were charging high premiums for drivers who had a lapse in their coverage for any reason.
Similar Posts:
- CA Court of Appeal: Prop 17 Backer Mercury Insurance “Intentionally Dishonest,” Behavior Was “Despicable” In Handling of Small Business Insurance Claim
- If Proposition 17 Passes, Who Would Qualify for the New Discount?
- Prop. 17: Auto Insurance Measure Appears To Fail
- Editorial: Special-Interest Prop. 17 Won’t Benefit Drivers
- Corporate Bucks Behind ‘Citizens’ Initiatives In Calif.
Posted on May 28th, 2010 by Elizabeth Martin
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