Billionaire Insurance Baron Buys Way onto November Ballot to Raise Auto Premiums 40%, Says Consumer Watchdog

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Jan 19, 2012, 02:02 ET

Good Drivers Penalized $1,000/Year

SANTA MONICA, Calif., Jan. 19, 2012 /PRNewswire-USNewswire/ -- The billionaire insurance baron-backed ballot measure to surcharge millions of California drivers by 40% has qualified for the November 2012 ballot, according to the California Secretary of State. Mercury Insurance Chairman George Joseph, who has already contributed over $8 million to the ballot measure, will reprise the company's previous effort to enact auto insurance surcharges with Proposition 17, which Californians rejected in June 2010 despite $16 million in deceptive advertising by Mercury.

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 the cost of insurance to drivers who have not maintained continuous coverage." Drivers will pay more for auto insurance even if the reason they did not have insurance previously is that they did not own a car or drive.

"Mercury's billionaire chairman is using California's initiative process so his company can raise premiums on good drivers," said consumer advocate Brian Stedge. "Mercury's ballot measure will 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, including students who went away for college, Californians who previously commuted by mass-transit, seniors and the long-term unemployed." The surcharges could reach $1,000 a year or more, Consumer Watchdog said.

Raising Rates by $89 Million Before Promising a "Discount"

At the same time that its Chairman is advancing the ballot measure with a promise of alleged discounts, Mercury Insurance is seeking permission from the California Insurance Department to raise its auto insurance rates by $89 million, an average 6% hike for two million Mercury customers. According to a formal challenge of the rate hike by the nonprofit Consumer Watchdog, Mercury wants to use some of the rate hike to cover its donations to politicians and its 2010 ballot measure, as well as to pay off fines levied against the company, which is prohibited by California law. Consumer Watchdog has asked the Insurance Commissioner to deny Mercury's request for the rate hike.

This is hardly the first time Mercury has faced challenges to its unfair rate hikes and illegal practices. Mercury Insurance has been prosecuted in civil courts for violating the provision of Proposition 103 that it now seeks to override and has faced regulatory scrutiny for a variety of discriminatory practices. 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."

Background on the Proposed Ballot Measure

Mercury's initiative would change California's insurance consumer protection law, known as Proposition 103, to legalize new 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 more than $62 billion since its enactment, according to a study by the Consumer Federation of America.

To date, the front group pushing the initiative, called "The American Agents Alliance, with Support from California Insurance Providers for Competitive Prices and Consumer Discounts," has received contributions from only five sources: Mercury Chairman George Joseph: $8,227,126.97, three Mercury Insurance Agents: $29,000 and a $5,000 donation from a health insurance agent. 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.

"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 was the last time an insurance company spent millions of dollars on a ballot initiative to save me money? The answer is never," said Brian Stedge.

Visit our website at: www.StopTheSurcharge.org

SOURCE Consumer Watchdog