Posted on 21 Jan 2010
A controversial initiative financed by the Mercury Insurance Group that would impact California automobile insurance rates has qualified for the June ballot, spurring supporters and opponents to argue about whether the initiative would help or harm consumers in the state.
The measure would allow insurers to base their prices in part on a driver's history of insurance coverage, which is currently barred because of a voter-approved measure that passed in 1988. Backers of the initiative backers say that it would allow companies to offer some people lower rates.
But opponents say it will cause rates to skyrocket for first-time buyers of car insurance or those who stop their coverage for whatever reason and then try to restart it. Chief among the opposition is the Santa Monica-based Consumer Watchdog, which was behind the 1988 measure that created the provision.
Kathy Fairbanks, a spokeswoman for the campaign to pass the measure, conceded that costs could go up for some people, but said it would help most consumers.
"We're focused on the more than 80 percent of drivers who follow the law and maintain coverage. We think it is unfair they are penalized under current law," Fairbanks said.
The law now allows insurance companies to give rate discounts to people who maintain coverage with the company for a particular period of time. However, companies cannot take past coverage into consideration when setting rates for new customers. The 1988 provision barring past consideration was part of Prop. 103, a comprehensive measure intended to control the rising costs of insurance.
Harvey Rosenfield, the founder of Consumer Watchdog, said the new measure is deceitful and could push the cost of insurance so high that more people simply would drive without it. That, in turn, could lead to higher insurance rates for everyone, he said.
Rosenfield doubted whether insurance companies would even offer the discount in the first place, saying he thinks the real motive is the ability to raise rates through a "vicious penalty."
He illustrated that with a video where he applies for auto insurance online through Mercury in Nevada, with the first time saying he currently has insurance and the second time saying he does not. Nevada does not have the same restriction as California.
In the first instance, the cost of insurance is $1,670 per year. Under the second, the cost is $2,896 for a year.
"What this shows is Mercury has been lying to the public," he said.
But Fairbanks said comparing Nevada to California is like comparing "apples to elephants," even though the only difference in the application was the status of insurance.
Rosenfield said he also wants Attorney General Jerry Brown to change the title and summary of the measure that will appear in the voter guide to reflect the possibility of increased costs.
He previously had accused Brown of omitting that possibility because Mercury is one of Brown's campaign donors. Brown's office said the wording change provided a fair and accurate description of the measure.