Proposition 33 Enters Final Stretch Before Next Week’s Election

Election Day draws ever closer and, after much wrangling between sides, California is readying for a long-awaited result from the lone auto insurance initiative that the state’s voters will decide on: Proposition 33.

On this year’s ballot, the purpose of the initiative is stated as follows: “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 discounts for drivers with some prior coverage [and] allows increased cost for drivers without history of continuous coverage.”

Auto insurers would be allowed to look at coverage history for the past five years, and there are a few exceptions where a driver could still be considered “continuously insured” even if they had a lapse in coverage. Insurers would have to overlook a lapse if it was:

1. For up to 90 days
2. For up to 18 months if the driver dropped insurance because he or she was laid off
3. For any amount of time if it was due to active military service

The state’s auto coverage industry is governed largely by Proposition 103, a regulatory law passed in 1988 that sets 19 factors by which California insurers are allowed to rate their policyholders. Proposition 33 would be the first major change to those set of rules, which currently does not include the presence of past coverage as a one of those acceptable factors.

Proposition 33: A Retrospective

The fierce battle between the measure’s proponents and opponents has drawn out over years and encompassed spats in court and committee hearings.

Proposition 33 was initially called the 2012 Automobile Insurance Discount Act before, in January, it was approved for the November ballot. Its roots go back to Proposition 17, which was narrowly rejected by voters in 2010 and was also backed by Mercury Insurance and Chairman George Joseph.

Proposition 17 sought to establish the same cross-insurer discounts as Proposition 33, but the latter measure beefed up provisions protecting discounts for military members and other groups. The changes spurred USAA, which specializes in insuring service members, to revert from being a Proposition 17 opponent to one of Proposition 33’s chief supporters.

Mike Mattock, senior counsel for USAA, told lawmakers during a legislative committee hearing hosted in September that the military-based protections in Proposition 17 were “really fast and loose with the facts.”

Proposition 33, however, built on relationships that began during the debate over Proposition 17, according to Bill Gausewitz, a former deputy commissioner at the California Department of Insurance (CDI) and one of Proposition 33’s main authors.

“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.”

Opponents say that Proposition 33, while billed as a consumer-minded measure, is actually misleading.

According to Consumer Watchdog, which has emerged as the proposal’s leading opponent, any number of legitimate reasons can lead a motorist to drop coverage for a period of time—including long-term unemployment or disability—but that motorist could face higher coverage rates under Proposition 33.

The measure, dubbed a “zombie proposition” that fails to die, punishes otherwise good drivers simply because they did not continuously hold coverage, according to Consumer Watchdog.

“Proposition 33 is another attempt by the billionaire chairman of Mercury Insurance to roll back consumer protection laws and raise rates on good drivers,” the advocacy group stated in a blog post.

In August, Proposition 33 supporters brought a lawsuit against election officials over ballot wording. The case brought the Proposition 33 campaign face to face with Consumer Watchdog litigators in court.

The litigation ultimately ended with a state Superior Court judge upholding the ballot’s language, but heated rhetoric continued after the ruling.

Referring to Mercury and Joseph, Carmen Balber, spokeswoman for Consumer Watchdog’s advocacy group Consumer Watchdog Campaign, said in a statement that “they’ll be back with the same lies and deception in a multi-million dollar campaign of TV and radio advertising backed by a horde of paid PR hacks and phony endorsers.”

The Proposition 33 campaign shot back at Consumer Watchdog, saying it had “earned a reputation for overheated hyperbole.”

Consumer Watchdog had spearheaded its own insurance initiative it hoped to see reach the next week’s ballot. In August, the Insurance Rate Public Justification Accountability Act (IRPJA) failed to have supporting signatures verified by the slimmest of margins, getting 109 percent of the minimum signatures confirmed by state officials instead of the required 110 percent.

The bulk of IRPJA sought to establish a health coverage system based on prior approval of rates similar to the state’s auto insurance system. However, a provision within IRPJA directly countered Proposition 33 and had language barring insurers from using past coverage as a legal rating factor.

Mercury’s Public Image a Major Factor

At the legislative hearing, Balber continued Consumer Watchdog’s harangue of Joseph as she highlighted his absence in a public forum. Balber was scolded by Sen. Ronald Calderon, the committee’s chair, for “singling out” the insurance executive.

“Harvey Rosenfield is not here either,” Calderon said, referring to Consumer Watchdog’s founder and president.

Joseph, called out in a video last year by Consumer Watchdog as a “grinch” behind efforts to surcharge capable motorists, has recently waded into the public eye with rare comments to media.

“You might wonder why anyone would be against such a proposition since it empowers customers and increases competition among insurers,” Joseph stated in an open letter to voters. “From what I’ve read, it seems the biggest complaint from opponents is that, since some insurance companies are for it, it can’t be good for consumers. I disagree.”

The executive also spoke to The Associated Press, directly addressing the personal attacks levied against him over Proposition 33.

“They make a lot of comments about billionaires, millionaires, all that,” he said in the article. “I’m 91 years old. I don’t have boats or jets; I don’t need them. But I do want to provide our company with a way to grow.”

For its own part, Mercury has also been trying to improve its public image, distributing a press release last week publicizing the insurer’s standing atop the latest consumer complaint rankings from the California Department of Insurance (CDI).

The rankings were first made public in early July, according to CDI spokeswoman Pat McConahay.

Proponents, Opponents Continue Clashes

Even now with the election less than a week away, endorsements of and opposition to the measure are continuing to roll in.

The National Organization of Women (NOW) released its opposition statement against Proposition 33 today, saying that much of its stance is related to “who the author and funders are, and who stands to benefit,” specifically naming Joseph.

Joseph “is personally funding Prop 33 to the tune of $16.4 million so his company will benefit,” NOW said in a statement.

Supporters aren’t backing down either.

Veterans have rallied behind the proposal, with several veterans groups gathering at a Veteran of Foreign Wars post in San Diego to back the measure. The groups voiced support for Proposition 33’s provision that preserves auto coverage discounts for service members while they are deployed abroad.

Pete Conaty, a main organizer for the San Diego event, also appeared at September’s hearing in Sacramento, where he chided Consumer Watchdog for its treatment of Joseph, a World War II pilot.

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

To view an original OAI infographic about Proposition 33, visit here.

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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