Sides Jockey Over Prop. 33 at Calif. Insurance Committee Hearing

A Tuesday committee hearing on Proposition 33 got testy at times as supporters and opponents of the proposal faced off about its potential impact on California coverage prices before voters head to the November polls.

The hearing, held in Sacramento, was hosted by the state Senate and Assembly insurance committees and focused on the ballot measure that, according to the ballot summary, “changes current law to allow insurance companies to set prices based on whether the driver previously carried auto insurance with any insurance company, allows proportional discount for drivers with some prior coverage and allows increased cost for drivers without history of continuous coverage.”

Senator Questions Subsequent Cost Shifts

At issue during many points during the hearing was whether the proposition would negatively impact any of the state’s driving populations.

Sen. Steve Bradford (D-Inglewood) asked panelists if there would be a “cost shift onto lower- and moderate-income folks to make up the difference” if insurers were to lose profit because of newly mandated discounts.

Representing Consumer Watchdog, one of the proposition’s biggest opponents, the group’s Washington, D.C., director Carmen Balber said that state regulators have called ratemaking a “zero-sum” game that would benefit those receiving the discount but inflate the cost of car insurance for disadvantaged groups.

Richard Marcantonio, an attorney with Public Advocates Inc., agreed, saying that experts believe “that the total of premium discounts has to be offset by an equal total of premium surcharges” and adding that such cost shifts tend to have more of an “adverse impact on communities of color” that have longer lapses in coverage or are uninsured.

Bill Gausewitz—a former deputy commissioner at the California Department of Insurance (CDI), supporter of Prop. 33 and one of its chief authors—said that such arguments are “all theoretical.”

Another panelist supporting Proposition 33, Steven Lehmann from Pinnacle Actuaries, highlighted a period between 1995 and 2002 when similar cross-company discounts were given to consumers with continuous coverage. During that period, Lehmann said, the number of uninsured motorists dropped from 29 percent to 14 percent.

The drop was an “indication that consumers could find affordable coverage at this time,” Lehmann said.

Balber disagreed, saying that the percentage of uninsured drivers declined but had nothing to do with those discounts. Instead, she said, it was because of tougher penalties against uninsured motorists, the fact that the “economy was great” and stronger ratemaking rules that helped decrease rates and gave more drivers “a chance to enter the market.”

Proposal’s Chief Financier a No-Show; Opponents Pounce

In the months leading up to the hearing, Consumer Watchdog publicly targeted Mercury Insurance chairman George Joseph, a chief funder of both Proposition 33 and Proposition 17, a similar ballot measure that unsuccessfully sought to establish cross-insurer discounts in 2010. Such public campaigns have included the consumer advocacy group calling Joseph “the insurance Grinch” who is waging a “devious attack” on the state’s policyholders.

Those volleys continued on Tuesday, as Balber said legislative staff barred her from bringing into the committee room a plastic life-size cutout of Joseph. The effigy, she said, was meant to highlight the fact that Joseph “has refused to show up today and has refused to show up in any public forum.”

Using letters to several public media outlets preceding the hearing, Consumer Watchdog had called on Joseph to attend the meeting.

Balber told committee members that Joseph was “the man behind the curtain” and added that voting consumers should know the billionaire insurance executive “who’s behind the measure.”

At one point, Ronald Calderon, chair of the Senate Insurance Committee, cut Balber off to say that “we’re not here to throw rocks and we’re not going to do that in this committee room.”

“We don’t want to be singling out anybody. Harvey Rosenfield is not here either,” Calderon told Balber, referring to Consumer Watchdog’s founder and president.

As part of the hearing’s public input portion, Pete Conaty, a legislative advocate for veterans, said the proposal would have great benefits for veterans but also added that the veterans groups he represents, including the Vietnam Veterans of America and the Veterans of Foreign Wars, have been put off by Consumer Watchdog’s public statements about Joseph.

“I would personally suggest that the opponents of this measure quit attacking the supporter and funder of this proposal,” Conaty said. “He is a WWII veteran, and if the attacks continue the veterans of this state will be very upset.”

Proposition 33 Has Garnered New Supporters

Some opponents of Proposition 17 have joined to support Proposition 33, including the Greenlining Institute and insurer USAA.

Mike Mattock, USAA senior counsel, said that Proposition 17 “was really fast and loose with the facts” when it came to military exemptions. Since then, language describing those exemptions was cleared up.

Discounts under Proposition 33 would still be eligible for certain exempt populations that lapse in coverage, including active military service members.

“Proposition 33 created a safe harbor with specifically that in mind,” Mattock said at the hearing.

However, Richard Holober, executive director of the Consumer Federation of California, said the campaign behind Proposition 33 promotes its advantages to military service members but leaves out significant points.

Returning service members who have become inactive for any number of reasons, including becoming disabled in combat, and are unemployed or returning to school would be ineligible for the discount because they are not considered active service members, according to Holober.

“They are no longer active duty, they transition to one of these statuses and they’re not driving for a few months,” he said, adding that such statuses lose them the cross-company discount.

Proposition 17 Comparisons Abound During Hearing

Many of Proposition 33’s architects also crafted Proposition 17, and those authors learned from their earlier failures.

“When we drafted this initiative, we looked at Prop 17 to see why it failed,” Gausewitz said at the hearing. “We made changes to improve the proposal.”

Mike D’Arelli, executive director of the American Agents Alliance, said that his group, backers of both proposals, had “learned a lot from Proposition 17 a couple years ago.”

“Those lessons are reflected in the language of this initiative,” he said. “This initiative is easy to understand. We tried to write it so everyone could understand it, unlike Proposition 17.”

D’Arelli said that the latest proposal benefits consumers.

“We know what consumers love, and they love discounts,” he said. “I love to pit carriers against each other to drive the price of insurance down.”

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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