Calif. Insurance Initiative Is One Step Closer to Getting on the Ballot

Backers of a proposed initiative that would let Californians switch auto insurers and still qualify for “continuous coverage” discounts—and could penalize others who have been uninsured—say they have collected more than enough signatures to put the measure on next year’s ballot.

The American Agents Alliance announced this week it was in the process of turning over to election officials more than 800,000 signatures in support of a referendum on the 2012 Automobile Insurance Discount Act, far more than the roughly 500,000 required.

“This was an easier effort than expected,” Mike D’Arelli, the group’s executive director, said in a statement. “People understand that this discount is good for consumers.”

D’Arelli and others pushing the measure say it would reward Golden State residents who have maintained coverage allowing them to switch companies to take advantage of lower rates without losing out on price breaks for continuous coverage. Those price breaks would be based on how many of the past five years policyholders had coverage in place.

Current state law allows companies to give auto insurance discounts to those who have been consistently insured, but only if they are sticking with the same company.

“It is ridiculous that the consumer loses the discount they have earned if they go to a new company,” he said.

One Person’s Discount Is Another’s Surcharge

Opponents of the proposal—and a similar effort that failed on last year’s ballot—say it would punish consumers who have not had vehicle policies, even if it was because they did not own a vehicle or drive.

“This ballot measure will affect millions by letting … auto insurers surcharge students who went away for college, Californians who previously used mass transit, seniors and the long-term unemployed,” Brian Stedge, a consumer advocate with the nonprofit Consumer Watchdog, said in a news release.

The initiative would allow for surcharges on the previously uninsured by amending Proposition 103, which was enacted in 1988. That consumer protection measure set a number of industry standards, including that auto insurers’ rate increases must be approved by state regulators and that premiums could be based on a set of factors including driving history and experience—but not whether a consumer had been previously insured.

The state attorney general’s office stated when authorizing the petition drive in August that the proposed 2012 initiative would allow providers to give discounts for continuous coverage and also “to increase cost of insurance to drivers who have not maintained continuous coverage.”

New Proposal Similar to Failed Proposition 17

The proposal is similar to last year’s unsuccessful Proposition 17, a multimillion-dollar effort that was heavily funded by Mercury Insurance. Supporters claimed it would save insured motorists hundreds of dollars when they switched companies.

Opponents, including Consumer Watchdog, called the measure a pretext for slapping surcharges on many drivers, including low-income residents already struggling to afford coverage in a stagnant economy. According to the Santa Monica-based consumer advocacy group, while Mercury is not bankrolling the 2012 measure, Chairman George Joseph has contributed more than $8 million to the effort.

The American Agents Alliance contends the current proposal differs in important ways from its predecessor. For example, drivers would still be considered consistently insured if their coverage lapsed for no more than 90 days in the previous five years or due to military service or loss of employment.

Consumer Watchdog, meanwhile, maintains those changes are superficial at best and that the initiative would unfairly allow insurers to charge motorists who have clean driving records but no continuous coverage history more than good drivers who have maintained policies.

About Matthew Morisset
Matthew Morisset is a proud alumnus of the University of Redlands, where he obtained a degree in English Literature. Utilizing his passion for analysis and writing, Matthew looks for important trends in the auto insurance industry and their implications for consumers and the market as a whole.

No comments yet.

Comment on this article