Calif. Insurance Proposition Brings Backers, Opponents to Court

An auto insurance proposal slated for the November ballot is the centerpiece of a case before the Sacramento Superior Court that will have its first major hearing Thursday.

Supporters of Proposition 33 are taking several state officials, including Attorney General Kamala Harris and Secretary of State Debra Bowen, to court over wording in the proposal’s title and summary contained in the voter guide.

The court faces a tight window to make its ruling, with the state’s printing deadline for voter guides set for Aug. 13.

Opponents, Supporters Gird for Court Battle

The summary reads that Proposition 33 “changes current law to allow insurance companies to set prices based on whether the driver previously carried auto insurance with any company.”

Specifically, the lawsuit seeks to swap the wording of “set prices” for “offer a continuous coverage discount,” with plaintiffs arguing that the former phrase is “blatantly false,” “misleading” and “commonly used to describe illegal price fixing,” according to court documents.

The legal brief from Proposition 33 supporters added that the phrase “set prices” encourages the belief that insurers set their own prices, when state law prohibits them from doing so by requiring insurers to submit rate filings to state regulators for approval.

Proposition 33 would change current law that allows insurers to price policies in part based on whether customers have been insured with that company before. Under the proposal, that pricing factor would expand across the industry, allowing insurers to adjust prices based on whether the customer was insured at all before applying for coverage from the new insurer.

Proponents say this will boost competition between insurers as motorists are allowed to take their “continuous-coverage discounts” to different carriers.

But opponents contend that the proposition would create a “hidden surcharge” for the state’s residents lacking a history of coverage, highlighting populations they said would be hit with higher rates because they did not have a previous policy, including low-income households, users of public transportation and drivers who give up coverage because they are away at school.

Opponents also say new motorists would be victimized since they did not previously have coverage, and getting cheap car insurance for young drivers could be made more difficult.

In a recent blog post, Consumer Watchdog president Jamie Court reached out to stakeholders and interested parties for support, calling the lawsuit “deceptive” and adding that Proposition 33 is a “civil rights issue.”

Proposition 33 gives insurers “new power to increase premiums for good drivers,” Consumer Watchdog stated in an Aug. 8 release.

Current law governing how insurers can calculate rates of coverage is based on Proposition 103, passed in 1988, which establishes three mandatory measures of motorists in determining their premium: their driving record, how long they’ve driven and their annual mileage.

Insurers can also use 16 optional factors to rate drivers, including the type of vehicle, academic standing, marital status and gender, but none of those factors include whether the driver was previously uninsured.

Proposition 33 would add a driver’s insurance history as another rate-determining factor.

Sides Picked, Endorsements Roll In as Court Case Draws Near

Proposition 33 has picked up a range of endorsements in the past months, from trade groups (including the Chinese Chamber of Commerce of Los Angeles and American Agents Alliance) to politicians (including former Assembly speaker and veteran of state politics Willie Brown and Sen. Juan Vargas) to law enforcement groups (including CDF Firefighters Local 2881, a statewide labor union).

At the same time, a “growing coalition” is seeing more opponents of Proposition 33 join together, including the California Nurses Association, California Alliance for Retired Americans and the California Labor Federation, the Consumer Federation of California said in an Aug. 8 statement.

The California Democratic Party is a part of the coalition against the proposition, while the state’s Republican Party has endorsed the measure.

About John Pirro
John Pirro is a licensed fire and casualty insurance agent specializing in various aspects of the auto insurance industry. He worked in the auto body repair industry before taking a reporting position at Online Auto Insurance News.

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