Consumer Watchdog – Editorial: Vote No On Deceptive Proposition 17

Californians should have no trouble figuring out how to vote on Proposition 17, the auto insurance measure. All they have to do is ask themselves if Mercury Insurance Co., which spent $3.5 million to qualify and support the initiative, has consumers’ welfare or its own financial interests in mind.

Prop. 17, which is almost entirely funded by Mercury Insurance, is designed to fool voters into believing it is simply a change in the law that would allow insurers to offer a “continuous coverage” discount on policies to new customers who switch auto insurance companies.

Customers generally would be eligible for the discounts if their coverage had not lapsed for more than 90 days in the past five years. If the lapse occurred because of military service abroad, the discount would still be available.

But that is hardly the whole story. Insurance companies also would be allowed to increase the cost of insurance to drivers who dropped their car insurance for 91 days or more in the past half decade.

Huge surcharges of several hundred dollars or more would be allowed even for motorists with good driving records. The fact is many Californians have had lapses in their auto insurance when they served in the military, went to college, suffered illnesses, lost their jobs or lived in a large city with good public transportation.

The threat of paying surcharges appears, in part, to be designed to force some people to pay for auto insurance during periods when they do not need it.

Prop. 17 does not stipulate the size of surcharges or discounts. But it doesn’t take a financial wizard to conclude that insurance companies are likely to take in far more money in surcharges than they dole out in discounts. Why else would Mercury spend millions of its own dollars on the measure?

Voters should be aware that drivers in states that do allow surcharges like the ones Mercury seeks often pay much higher premiums. The surcharges could be so steep that drivers would be unable to afford coverage and would join the large number of uninsured motorists on California’s roads.

Like Prop. 16, which is designed to limit competition for PG&E, Prop. 17 is the second measure on the June ballot that was initiated and financed by a single company for its own benefit at the expense of the public interest.

These propositions are base abuses of the initiative process, which was created to protect the public against special interests and government favoritism or failure to adequately address important issues.

We trust that voters will see through Mercury Insurance Co.’s deception and urge them to soundly reject Prop. 17 on June 8.