Mercury rising

Insurance giant’s initiative could cost low-income drivers the most

Opponents say insurance discounts promised by Proposition 17 will really cost you.

Opponents say insurance discounts promised by Proposition 17 will really cost you.


Proposition 17, appearing on the ballot this June, would allow insurance companies to give discounts to new customers who’ve never let their car insurance lapse. Sounds good, right?

Not to opponents of the initiative, who claim the insurance-company-funded measure really seeks to unravel consumer protections and rules governing insurance rates that were set by Proposition 103 some 20 years ago.

Mercury Insurance Group, California’s third-largest insurance company, has given $5.25 million to date to pass Proposition 17. Mercury is by far the largest financial backer, but the measure has also been endorsed by the California Chamber of Commerce.

Opponents to the proposition include the group Consumer Watchdog (the authors of Prop. 103), the California Democratic Party and state Assemblyman Dave Jones, who is running for state insurance commissioner. Jones told SN&R the measure undermines rules keeping car insurance affordable and readily available for low-income individuals.

“Proposition 17 superficially sounds attractive, because it will allow lower rates for those who have continuous histories of auto-insurance coverage. But the flip side of that means rates will go up for those who’ve had breaks in their auto insurance coverage,” said Jones.

But according to Mike D’Arelli, executive director of the Alliance of Insurance Agents & Brokers, 82 percent of insured drivers will qualify for the continuous coverage discount.

“We love Prop. 17 because Prop. 17 is going to give consumers more choice of insurance companies, and when consumers have more choice, it’s going to create more competition and lower rates for consumers,” D’Arelli said.

Proposition 103 set rules for insurance companies to follow when calculating car-insurance rates. The driver’s safety record, number of miles driven annually and the driver’s years of experience are all primary factors that car-insurance companies use today.

Assemblyman Dave Jones says Mercury Insurance Group couldn’t get what they wanted through the Legislature, so the company is going to the ballot.

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The current law prohibits companies from penalizing customers who have had a lapse in coverage. But Proposition 17 would let insurance companies impose a surcharge on customers who’ve had a lapse in coverage of 91 days or more.

Jones noted Mercury’s earlier efforts to move similar changes through the Legislature have failed.

“There was an effort to pass it legislatively, but the courts struck it down as a violation of Proposition 103,” Jones explained. “So now the proponents decided to go around the Legislature, around the court and amend 103 directly. Just about every consumer group that I’m aware of opposes Proposition 17, because they’re concerned about its negative impact on ordinary Californians.”

But backers say the new rules will save drivers who maintain their insurance coverage about $250 per year.

“Opponents don’t dispute the fact that the great majority of drivers in California would qualify for this discount,” D’Arelli said. “What [opponents] really focus on is how does this affect the 18 percent of people who don’t have insurance. … [Uninsured drivers] are not going to be worse off under Prop. 17 than they are today. They’re paying higher rates today, just as they would be paying higher rates under Prop. 17.”

But the law doesn’t actually require companies to give discounts to insured drivers. D’Arelli explained that companies can grant the discount after six years or six months, depending on the carrier.

And opponents say Proposition 17 will be a particular burden on low-income drivers and students. Scott Lay, president of the Community College League of California, says students are already under struggling with fee hikes.

“This is just one more burden that would be hefted on California’s struggling students and low-income individuals,” Lay said. “Essentially, $7 million has been raised all from one company; it doesn’t seem to be something that the whole industry wants. It seems to be paid for by one particular interest.”