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Perspectives: Mercury General, Poizner Make Millions Disappear in Primary Election

WASHINGTON, DC -- In the end, the insurance giant just couldn't convince Californians it had their interests at heart.

Despite $16 million in campaign spending by Mercury General, a controversial automobile insurance ballot question lost at the ballot box. The Mercury-founded and funded Californians for Fair Auto Insurance Rates sought to convince voters that under Proposition 17 some 80% of them would save money on their car insurance by becoming eligible for longevity discounts even if they switch insurers. Extending those discounts is now illegal under Proposition 103 for a reason, opponents argued, saying the effect would have been to necessitate discriminatory higher rates against drivers with any gap in their coverage, including the poor and military personnel.

Faced with a more than 15:1 spending disadvantage, foes including the Campaign for Consumer Rights adopted the slogan, "When was the last time an insurance company spent millions to save you money?"

That catchy bit of politics may have had an impact, said Samuel Sorich, president of the Association of California Insurance Companies, who supported Prop 17. "It did tap into what is an inherent skepticism," he said.

As Prop 17 opponents raised Mercury's history with regulators as an issue, the Department of Insurance made fresh allegations of wrongdoing by the insurer, including the overcharging of customers. The Yes on 17 campaign sought to separate the merits of the question from Mercury's regulatory issues -- even while Mercury continued to fund virtually the entire enterprise.

Mercury "got taken for a ride" by political consultants, said Jamie Court, president and chairman of Consumer Watchdog and a board member of its CCR affiliate. Prop 17, which lost by a 4% margin, was never going to pass, he said.

"The entire coalition is disappointed with the outcome, as we all believe California consumers will ultimately end up losing as a result," Mercury said in a company statement.

With the same amount of money, Mercury could have given $250 rebates to 64,000 new policyholders. Because the company claims a better-than-96% renewal rate, that might have given the insurer's customer rolls a nice boost -- which wouldn't hurt. Mercury General Group's share of the California private passenger vehicle insurance market slipped from 9.4% to 8.7% from 2008 to 2009. It dropped from being the third-largest such carrier to fifth-largest, according to BestLink, which provides online access to A.M. Best's Global Insurance & Banking Database.

In the California scheme of things, perhaps Mercury General's losses don't amount to much. Sitting Insurance Commissioner Steve Poizner spent approximately $25 million of his own money on a race for governor, only to be crushed by Meg Whitman in both spending -- who spent three times that just from her own eBay fortune -- and in the vote -- where she doubled his total. At least he covered the spread.

But the June 8 primary wasn't all about money. While as surprised as anyone, 16-year Department of Insurance enforcement attorney Brian FitzGerald holds a tenuous lead over veteran Assemblyman Mike Villines, despite investing in little more than the filing fee, a blog and a Facebook page. Counting of outstanding mail-in votes, provisional ballots and damaged ballots could go on for weeks, according to the Secretary of State's office.

Meanwhile, FitzGerald is back at work -- though maybe with a closer eye on the corner office.

Contact the author, Sean P. Carr, Washington Correspondent at: sean.carr@ambest.com