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Should Insurance Discount Be Transferrable? No: It Can Mean Higher Rates if a Policy Lapses

Op-Ed Special to The Desert Sun

Last month, the California Department of Insurance cracked down on an
insurance company that has been overcharging motorists for 15 years.
 That company, Los Angeles-based Mercury Insurance, also wrote and is
bankrolling Proposition 17 on the June ballot. Mercury wants you to
believe that its measure will save everyone money.

When was the last time an insurance company spent $5 million on a
ballot initiative to lower your rates?

In fact, Mercury’s Proposition 17 gives insurance companies the power
to raise rates on millions of Californians. Which is why you should
vote no.

This deceptively written initiative allows insurance companies to
surcharge people who have not been previously insured  -  even if they
are perfect drivers who weren’t insured because, for a time, they
weren’t driving. Proposition 17 also penalizes anyone who had to drop
coverage for more than 90 days over the last five years, or missed just
one insurance payment.

These surcharges are illegal in California today: the voters banned
them in 1988. But in states that have laws similar to Proposition 17,
the surcharges can raise the price of car insurance by 200% or more –
adding thousands of dollars to the annual cost of insurance.

We must stop Prop 17 because if it passes, insurance companies will
be less accountable and allowed to raise our rates. Especially hard hit
will be seniors who stopped driving for a period of time. Ditto for
college students who don’t need a car until the summer.  Or people who,
in this horrible economy, simply can’t afford to pay for insurance –
even if they are good drivers. Proposition 17 would even punish
Californians who serve in the military stateside and must interrupt
their coverage while in boot camp.

Of course, when millions of good drivers face massive surcharges when
they try to buy car insurance, California will see more drivers go
uninsured, because they no longer can afford to buy coverage.  When
fewer drivers buy insurance, we all end up paying more.

Californians are rightly suspicious when big corporations try to
manipulate the initiative process for their own self-interest;
Proposition 17 is one of two special interest initiatives funded by big
corporations on the June ballot. (The other is PG&E’s Proposition
16.)

Mercury Insurance has also certainly proved that it cannot be
trusted. Arguments about Prop. 17 made by the company and its paid
spokespeople have been repeatedly reviewed and rejected as false by the
courts and state regulators.

And just recently, the insurance commissioner brought an
administrative lawsuit against Mercury alleging that it engaged in more
than 50 practices that are illegal under California law, victimizing
thousands of Californians. Investigators discovered that Mercury failed
to give customers the discounts they were entitled to and overcharged
people just because they are self-employed, work out of their homes,
were waitresses, or had health problems. The company even broke its own
previous pledges to regulators that it would stop violating California
laws. The company faces tens of millions of dollars in fines.

Mercury Insurance’s sponsorship of Proposition 17 is like Bernie
Madoff backing a ballot proposition claiming to protect investors.

The last thing California families can afford right now is an
initiative that makes insurance companies less accountable for their
actions, leads to more uninsured motorists and skyrocketing auto
insurance premiums. That’s why Consumers Union, the non-profit publisher
of Consumer Reports magazine, veterans groups and seniors all agree:
Vote no on Proposition 17.
—————

Harvey Rosenfield is the founder of Consumer Watchdog and author of
1988 insurance reform Proposition 103. Contact him via the Web site
stopprop17.org

PROPOSITION 17, Auto Insurance:

Allows auto insurance companies to base their prices in part on a
driver’s history of insurance coverage.

Fiscal Impact: Probably no significant fiscal effect on state
insurance premium tax revenues.