New Video Exposes Mercury Insurance Initiative Goal: Raise Auto Premiums in California to Put 'Into Line' With Other States' Higher Car Insurance Rates

Jan 26, 2010, 14:16 ET from Campaign for Consumer Rights

Advocates Calls on AG Jerry Brown to Review Evidence and Explain Premium Increase in Official Summary of Initiative

SANTA MONICA, Calif., Jan. 26 /PRNewswire-USNewswire/ -- Campaign for Consumer Rights (CCR), the campaign affiliate of Consumer Watchdog, has released a new video today showing that motorists pay surcharges of up to 227% for auto insurance in states where Mercury Insurance is allowed to penalize people for not having prior insurance coverage, according to Mercury's own web site. This video -- at -- checked premiums in states that Mercury Insurance identifies as the models for the ballot measure it has qualified for the June 2010 ballot.

The proposed Mercury Insurance initiative seeks to gut a provision of the 1988 insurance reform measure Proposition 103 that prohibits insurance companies from surcharging people who have not driven previously, had a lapse in coverage for any reason, or have even missed a single insurance payment.

CCR has sent the video and an associated letter to Attorney General Jerry Brown asking him to review this evidence in advance of his release of the final Title and Summary for the initiative, and include the fact that this measure will allow insurance companies to raise auto insurance premiums, not just lower them. The letter is available here:

Last week, CCR released a video showing how Mercury surcharged a Nevada resident 73% for his premium because there are no Prop 103 protections in the Silver State. Mercury's front group, Cal-FAIR, called the smoking gun video "lame and misleading," saying that it was inappropriate to compare what would happen to California drivers under the initiative to the premium surcharges faced in Nevada.

In the new video, Proposition 103 author Harvey Rosenfield quotes the exact language of the Mercury Insurance initiative, which says that the purpose of the measure is to "simply bring California into line with other states like Texas, New York, Oregon, Washington and Florida."

He then provides the evidence that in those states, as in Nevada, Mercury's surcharge proposal drives up premiums for good drivers who have done nothing wrong. The results are staggering:

--  In Texas, Mercury forces a person whose coverage lapsed while were serving in the military to pay 33% more. Mercury's website actually asks if you were on active duty in order to impose the soldier surcharge;

--  Mercury charges 74% more in Texas for a driver who didn't previously have auto insurance because he did not have an automobile (and did not require insurance);

--  In New York, a consumer faces as much as an 81% "no prior insurance" surcharge; and

--  In Florida, Mercury's website quotes a 227% increase for a driver with a perfect record if he did not have insurance at the time he requested the policy.

"Mercury Insurance will spend millions to lie to voters about the impact of its initiative, which is why it is so important that Attorney General Jerry Brown provide Californians with the truth that it will raise insurance costs for millions of California drivers," said Rosenfield. "In the plain language of its initiative, Mercury says its initiative would make California like Texas and Florida, so Brown must disclose what happens to drivers in those states."

Mercury Illegally Penalized Californians Who Had a Lapse in Insurance Until 2005, Surcharging Perfect Drivers Up to 57%

For many years Mercury Insurance unlawfully applied a "continuous coverage" discount to its California customers -- the same practice it proposes to legalize through its initiative. In 2003, Consumer Watchdog obtained insurance quotes from Mercury's web site that revealed Mercury imposed an enormous surcharge on motorists who noted a lack of prior insurance on their application. Consumer Watchdog tested several customer profiles in communities throughout California and found that when altering only the person's prior insurance history, Mercury's surcharge resulted in 34% to 57% higher premiums for those who did not have prior insurance. One such driver, described in the new video, faced a 41% surcharge because he had a lapse in coverage. In 2005, after a civil suit and a Court ruling, Mercury finally stopped imposing the illegal premium surcharge.

"You don't even have to look out of state to see what this initiative will do. Mercury is just trying to legalize the higher rates it used to charge California drivers until it was caught and forced to stop," said Rosenfield. "Californians are struggling to pay their bills in this terrible economy. The last thing we need right now is to have Mercury Insurance, a discredited and untrustworthy insurance company, try to swindle hundreds of dollars out of our pockets."

The letter CCR sent to Attorney General Brown includes, in addition to the proof of premium surcharges, detailed rulings and statements from the California Department of Insurance and California courts explaining unequivocally how the Mercury initiative will raise auto insurance premiums.

In 2002, the California Department of Insurance issued a report on the effects of changing the law, as Mercury proposes in its initiative, to allow insurers to create a "continuous coverage" rating factor, also known as "portable persistency." The CDI determined:

People who do not have prior insurance are surcharged under portable persistency. Many of these people are those that can least afford to pay for insurance or who already have high premiums caused by other rating factors. This discourages them from buying insurance, which may add to the number of uninsured motorists and ultimately drives up the cost of the uninsured motorist coverage for every insured.

The report was published during the tenure of Judge Harry Low (retired) who was appointed to serve as Insurance Commissioner after Chuck Quackenbush resigned in 2000.

Mercury Insurance, California's third largest insurance company, has already spent $4.5 million on this initiative that will raise premiums and increase the number of uninsured drivers on California roads. Campaign for Consumer Rights, a nonpartisan, nonprofit organization, is working with consumer groups, seniors, unions and soldiers to oppose Mercury's deceptive initiative.

The first video showing how the Mercury initiative will raise auto insurance premiums can be seen here:

Campaign for Consumer Rights is the campaign affiliate of the nonpartisan, nonprofit Consumer Watchdog.

SOURCE Campaign for Consumer Rights