Consumer Watchdog: CA Attorney General Says Proposed Initiative Gives Auto Insurers New Power to Raise Rates

Aug 12, 2011, 15:12 ET from Consumer Watchdog

Mercury Insurance Launches Another Campaign to Increase Auto Premiums, Repeating Failed Prop 17 Effort

SANTA MONICA, Calif., Aug. 12, 2011 /PRNewswire-USNewswire/ -- California Attorney General Kamala Harris issued a title and summary yesterday for Mercury Insurance's ballot initiative explaining that the proposed initiative, "Will allow insurance companies to increase cost of insurance to drivers who have not maintained continuous coverage." The proposed initiative authorizes a currently prohibited surcharge on millions of California motorists who did not purchase insurance at some point in the prior five years, even if they had not been driving or did not own a car.

Mercury Insurance's campaign to repeal current protections against such a surcharge is a repeat of its 2010 measure, Proposition 17, in which Mercury, the state's fourth largest auto insurer, spent $16 million but failed to win over voters who were not fooled by its deceptive advertising campaign. According to the nonprofit, nonpartisan Consumer Watchdog, the Mercury initiative would lead to surcharges of more than 40% for millions of Californians who had a prior lapse in insurance coverage or simply had not been driving for a time.

"Mercury Insurance is back with another costly ballot initiative which attempts to trick voters into giving insurance companies new power to increase premiums and punish consumers," said Brian Stedge a consumer advocate with Consumer Watchdog. "Mercury Insurance has a terrible history of mistreating its customers, ignoring the law and trying to deceive voters, and Californians need to know that you can't trust Mercury Insurance."

Last year, editorial boards across the state described Mercury's initiative as:
- "a special interest scam" – San Jose Mercury News
- "a daunting additional cost for those who are desperate to get coverage" – San Francisco Chronicle
- "designed to fool voters" – Contra Costa Times
- "won't 'fix' anything" – Los Angeles Times

This Mercury initiative, which is being sponsored by the front group known as the Agents Alliance, promotes precisely the same self-serving policy as Proposition 17. The current measure's proponent, Mike D'Arelli, was Mercury's chief spokesman during the 2010 Proposition 17 campaign.

The Attorney General's full Title and Summary released Thursday evening is:

CHANGES LAW TO ALLOW AUTO INSURANCE COMPANIES TO SET PRICES BASED ON A DRIVER'S HISTORY OF INSURANCE COVERAGE. INITIATIVE STATUTE. Changes current law to permit insurance companies to set prices based on whether the driver previously carried auto insurance with any insurance company. Allows insurance companies to give proportional discounts to drivers with some prior insurance coverage. Will allow insurance companies to increase cost of insurance to drivers who have not maintained continuous coverage. Treats drivers with lapse as continuously covered if lapse is due to military service or loss of employment, or if lapse is less than 90 days. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local government: Probably no significant fiscal effect on state insurance premium tax revenues. (11-0013.)

As the title indicates, Mercury's initiative would change California's insurance consumer protection law, known as Proposition 103, to legalize surcharges by Mercury and other insurance companies. Those surcharges were made illegal when voters enacted Proposition 103 in 1988 and barred insurance companies from considering a driver's coverage history when he or she applies for insurance. Proposition 103 has saved auto insurance policyholders $62 billion since its enactment according to a study by the Consumer Federation of America.

Mercury Insurance has been prosecuted in civil courts for violating the provision of Proposition 103 that it now seeks to override. In a regulatory filing relating to Mercury's illegal practices, the California Department of Insurance has written:

"Mercury's lengthy history of serious misconduct, and its attitude – contempt towards and/or abuse of its customers, the Commissioner, its competition, and the Superior Court – are all relevant to determining the penalty needed to best ensure the protection of the public from future violations and wrongdoing... Among Department [of Insurance] staff, consumer attorneys, and consumer victims of its bad faith, Mercury has a deserved reputation for abusing its customers and intentionally violating the law with arrogance and indifference."

"The last thing Californians' need is another self-serving ballot initiative by a corporation hell bent on increasing its profit margins on the backs of already struggling families," said Brian Stedge.

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SOURCE Consumer Watchdog



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