Insurance Commissioner Poizner: Mercury Initiative WILL Allow Auto Insurance Companies to Raise Premiums

Confirmation Comes as AG Brown Prepares Title and Summary for Mercury's Prop 17 That Will Appear on June Ballot

SANTA MONICA, Calif., Feb. 2 /PRNewswire-USNewswire/ -- Proposition 17, the Mercury Insurance ballot initiative, will allow insurance companies to raise premiums for many drivers in California, according to the Department of Insurance's official analysis released last night. Mercury has insisted that its initiative will only reduce premiums and denied that it would increase premiums.

According to the Department's analysis (http://insurance.ca.gov/0100-consumers/ContinCovDisc.cfm):

"[I]f an insurer offers a continuous coverage discount for some drivers it will result in a surcharge for other drivers. This is because automobile insurance discounts and surcharges must offset one another so that each rating factor applied by an insurer is evenly balanced within the insurer's rating plan." [Emphasis added.]

The Department's action comes as Attorney General Jerry Brown prepares the final Title and Summary of the Mercury Insurance initiative for inclusion in the ballot pamphlet and other voter materials. The Attorney General must submit his final Title and Summary to the Secretary of State on Friday February 5.

"Insurance Commissioner Poizner has provided the Attorney General with the definitive analysis he needs to accurately summarize the Mercury Insurance initiative and the price hikes that will be allowed if it passes," said consumer advocate Harvey Rosenfield, who authored the 1988 insurance reform measure Proposition 103.

"Voters rely on the Attorney General for independent analysis of initiatives. That's especially true in a case like Prop. 17, which is funded by a single corporation that has endless money to confuse voters with misinformation."

Prop. 17 would legalize surcharges by Mercury and other insurance companies that are now illegal under California law – Proposition 103, approved by the voters in 1988. That measure, which has saved California motorists over $63 billion, bars insurance companies from considering a driver's coverage history when a motorist applies for insurance.

The Mercury initiative would lead to surcharges of between 40-227% for soldiers, seniors, students, the unemployed who did not have insurance – even if they did not own a car – or who were forced to drop coverage for financial or personal reasons and then tried to restart coverage. In the words of the Department of Insurance, Prop. 17 would allow insurers "to do something that under current law they cannot do."

The Department of Insurance has long sought to enforce Proposition 103's ban on the consideration of prior insurance against Mercury. When Mercury was caught violating the law in the late 1990s, the agency issued a regulation directing Mercury to stop. When Mercury was sued in civil court for hundreds of millions of dollars in illegal surcharges, the Department weighed in. And when Mercury got the legislature to pass, and Governor Gray Davis to sign, a law nearly identical to Mercury's initiative, the courts relied on the Department's expertise when it invalidated Mercury's law, noting that it would raise people's premiums in violation of the law.

Until the courts ordered Mercury Insurance to stop in 2005, however, the company illegally forced a surcharge on hundreds of thousands of its customers who had had a break in insurance coverage in the previous five years.

"Of course Mercury wants to legalize premium hikes it was forced to stop five years ago. But voters can prevent that by voting no on Prop. 17," said Rosenfield.

The Campaign for Consumer Rights, a nonpartisan, nonprofit organization is working with consumer groups, seniors, unions and soldiers to oppose Mercury's deceptive initiative. The Campaign for Consumer Rights is the campaign affiliate of the nonpartisan, nonprofit Consumer Watchdog.

SOURCE Campaign for Consumer Rights