Consumer Watchdog – Auto Insurance Ballot Measure Revs Up

The Secretary of State’s campaign finance database shows insurance giant Mercury General Corp. on Friday put $1 million into Californians for Fair Auto Insurance Rates, the campaign committee it set up to back “The Continuous Coverage Auto Insurance Discount Act” for next year’s ballot. This doubles the company’s total previous contributions, made in June and September.

Today, the committee announced the state Attorney General’s office has released the measure’s title and summary, and gathering of petition signatures has begun; it needs 433,971 valid signatures to qualify for the ballot, so the committee will seek about 700,000.

Current law lets insurance companies offer a discount to their customers who maintain “continuous” coverage, but drivers can’t take their continuous coverage discount with them if they change insurance carriers. The proposed ballot measure would change this so the discount is portable even if motorists change insurance companies, something most other states already allow.

The official title and summary:

ALLOWS AUTO INSURANCE COMPANIES TO BASE THEIR PRICES IN PART ON A DRIVER’S HISTORY OF INSURANCE COVERAGE. INITIATIVE STATUTE. Changes current law to permit insurance companies to offer a discount to drivers who have continuously maintained their auto insurance coverage, even if they change their insurance company, and notwithstanding the ban on using the absence of prior insurance for purposes of pricing. Establishes that lapses in coverage due to nonpayment of premiums may prevent a driver from qualifying for the discount. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local government: This measure would probably have no significant fiscal effect on state and local governments.

“The continuous coverage discount will benefit all drivers who follow the law and maintain insurance coverage. This simple reform will provide lower rates for more California drivers by encouraging competition and will provide them with more options and choices in their insurance coverage,” campaign committee co-chair Jim Conran of Orinda, president of Consumers First and former director of the California Department of Consumer Affairs, said in a news release today. “It encourages California drivers to not only keep their coverage current, but to go out and find the best rate without being forced to lose a discount. Consumers should not be penalized and lose discounts for maintaining coverage just because they change their insurance company.”

UPDATE @ 6:15 P.M.: Consumer Watchdog executive director Doug Heller says Mercury does not have your best interests at heart in pushing this ballot measure.

He says the initiative is a repackaging of Mercury-sponsored legislation invalidated by a state appeals court in 2005 after the court determined the bill would illegally surcharge drivers who had a lapse in coverage; the court’s ruling explained that an alleged discount given to drivers who have had continuous insurance coverage must be offset by a surcharge on people with a lapse in their coverage.

So this initiative, Heller says, would let insurers penalize people who’ve missed just one payment, or who decided not to drive for a time and let their insurance lapse during that time.

“Mercury is using the initiative process to raise rates on struggling families in the middle of an economic crisis,” he said in a news release. “Auto insurers shouldn’t be allowed to jack up your premium because you stop driving for a time, missed one payment or are simply struggling after losing a job.”

As more and more people let their insurance lapse during this economic crisis, Mercury’s proposed to penalize those who’ve stopped and then want to restart coverage will force many drivers to remain uninsured, Heller says, thus raising the cost of uninsured motorist coverage for everyone else and leaving California’s roads less safe.