Consumer Watchdog: Mercury Insurance Front Group Buys Way onto November Ballot With Measure to Raise Auto Insurance Premiums 40%

Millions Affected: Students who went away for College, Californians who previously used mass-transit, seniors and the Long-Term Unemployed To Face Surcharges

SANTA MONICA, Calif., Nov. 16, 2011 /PRNewswire-USNewswire/ -- A political committee funded by Mercury Insurance Chairman George Joseph is reportedly submitting signatures for a November 2012 ballot measure that will reprise the company's failed effort to enact auto insurance surcharges with Proposition 17, which Californian's rejected in June 2010.

The Mercury initiative aims to remove a consumer protection from the 1988 insurance reform initiative Proposition 103 that currently makes it illegal to surcharge drivers based on their history of buying auto insurance.  The new initiative will, according to the official Attorney General Title and Summary, "allow insurance companies to increase cost of insurance to drivers who have not maintained continuous coverage."

"Mercury's billionaire chairman is spending millions to try and pass an initiative that will give his company a new way to raise premiums on perfectly good drivers," stated consumer advocate Brian Stedge.  "This ballot measure will affect millions by letting Mercury and other auto insurers surcharge students who went away for college, Californians who previously used mass-transit, seniors and the long-term unemployed."  

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.

Under the proposed initiative, Californians who had chosen not to drive for a time and did not need insurance would be surcharged when a new job, move or some other circumstance requires them to buy insurance again.  This unfair penalty would punish drivers with premium surcharges that could reach $1,000 a year or more just because they took a hiatus from their automobile.

New Initiative, Same As The Old Initiative
Mercury's front group claims to have made changes to the new measure that make it different than Proposition 17, but its changes are superficial, says Consumer Watchdog.  Under current law, a good driver who had insurance in the past and a good driver who did not, will be charged the same premium for auto insurance all other things being equal.  If the Mercury measure were law, drivers who did not have insurance continuously for the past five years – even if they didn't need it because they did not have a car for a time – will pay a higher premium than those without a break in coverage.  

Adding a new hurdle to buying insurance, especially for people who have struggled financially, only means that more Californians will end up driving without insurance.  That raises costs and concerns for everyone.

"Mercury and its agents are promoting a self-serving initiative that is good for Mercury but bad for California.  Californians will have to ask themselves a simple question: when has an insurance executive spent millions of dollars to save me money?  The answer is never," stated Brian Stedge.  

To date, the front group pushing the initiative, called "The Americans Agents Alliance, with Support from California Insurance Providers for Competitive Prices and Consumer Discounts," has received contributions from only three sources:  Mercury Chairman George Joseph: $8,077,126.97 and two Mercury Insurance Agents: $24,000. The so-called "California Insurance Providers for Competitive Prices and Consumer Discounts" is a completely fabricated organization for this campaign and the American Agents Alliance primarily consists of Mercury Insurance Agents.

The Attorney General's full Title and Summary for the Mercury measure is as follows:

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:

"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."

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SOURCE Consumer Watchdog