Consumer group assails auto insurance initiative
An initiative that would change the way auto insurance premiums can be calculated under California’s landmark Proposition 103 was certified Wednesday to appear on the June 8 ballot, just hours after the author of the existing law assailed it as a deceitful attempt to raise insurance rates for millions of drivers.
Harvey Rosenfield, founder of the group Consumer Watchdog and the author of Proposition 103 in 1988, said the new initiative would raise rates substantially for any motorist who, for whatever reason, has gone more than 90 days without insurance.
To dramatize his claim, Rosenfield unveiled a video in which he used a Mercury Insurance Web site to obtain a rate quote using an address in Nevada, where surcharges are allowed for drivers who have had a lapse in coverage. The rate quoted for a driver currently without insurance was 73 percent higher than for a driver currently with insurance.
“The impact is pretty profound,” Rosenfield said on a conference call with reporters. “We know this is going to in fact raise millions of Californians’ premiums.”
The initiative is sponsored by Mercury Insurance, which has already spent more than $3.5 million to qualify it for the ballot.
Supporters contend the initiative will allow most drivers — the 80 percent who do have insurance at any given time — to receive small continuity discounts when they switch insurance companies.
Under Proposition 103, insurers can base rates only on the three factors that were cited in the law — a driver’s safety record, the number of miles driven annually and number of years of driving experience — and a variety of additional factors that have since been adopted by the state Department of Insurance.
Among those additional factors is a loyalty discount that insurers can provide to customers who have been with them for a period of time. Under current law, that discount cannot be carried over if a driver switches insurance companies.
The initiative would allow insurance companies to offer discounts to new customers if they have continuously been insured by other companies.
“The fact that I can’t take my continuous coverage discount with me means that I’m not getting the lowest price I can get,” said Kathy Fairbanks, spokeswoman for the advocacy group Californians for Fair Auto Insurance Rates, funded by Mercury.
Fairbanks called Rosenfield’s Nevada example an “apples to oranges” comparison because California’s auto insurance market is unique.
Doug Heller of Consumer Watchdog, however, noted the initiative itself makes comparisons with other states. In its findings, the initiative declares the change in law “will simply bring California into line with other states.”
Heller noted there are many legitimate reasons why a driver might have a lapse in coverage: attendance at a college campus where a car is unnecessary, a stint in the military, recovery from surgery, or simply a newly licensed driver attaining insurance for the first time.
“In addition to being penalized for not having driving experience, which is legitimate, they would get penalized a second time for not having had insurance before,” he said.
Heller noted California already has a very competitive auto insurance market. “With very few exceptions, anyone can find a lower cost right now,” he said.
A check on the Department of Insurance Web site on Wednesday revealed premium estimates from 51 different insurers for a hypothetical married couple from Thousand Oaks.
Fairbanks noted the initiative provides generous exceptions to the continuous coverage requirement, exempting anyone who has had a lapse of up to 90 days in the previous five years for any reason other than nonpayment of premiums.
Heller countered that such an exemption may seem generous “to an insurance company executive,” but that it typically takes people who’ve lost their job and sold their car longer than 90 days to get back on their feet.
Consumer Watchdog has waged an ongoing battle with Mercury Insurance, which it alleges is a bad actor in California’s insurance marketplace. It notes the company settled a claims-paying violation allegation in 2008 by paying a $250,000 fine and that in a court filing last year attorneys for the Department of Insurance asserted the company “has a deserved reputation for abusing its customers and intentionally violating the law with arrogance and indifference.”
Fairbanks said although Mercury thus far is the only contributor to the initiative campaign, “we expect that our coalition list will grow.”
Tags: auto insurance initiative, Consumer Watchdog, Harvey Rosenfield, insurance rates, Mercury Insurance, Proposition 103, Thousand Oaks