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Prop 17 - The auto insurance company's initiative

Original post made by Rae on May 18, 2010

Prop 17, the auto insurance company's initiative, is written in a way that would lead you to believe auto insurance companies will absolutely lower insurance rates for some Californians.

Ask yourself, why would the Mercury Insurance Group, a company facing possibly millions of dollars in fines for violation of state laws, discriminatory practices and illegally overcharging thousands of consumers, not only sponsor Prop 17, but put $3.5 million into getting it passed?

There is nothing in Prop 17 that says an insurance carrier must, or will, lower their rates; just as there is nothing in Prop 17 that says an insurance carrier won't raise their rates. Prop 17 removes the provision in Prop 103 (passed in 1988) that prohibits insurance companies from using whether or not an individual had continuous insurance coverage to set the rates for that individual.

I guess if you believe that insurance companies, including the Mercury Insurance Group, are honest, altruistic, not-for-profit organizations that just have consumer's welfare at heart and want to serve their clients even if it means they take a dip in profit, then I have a bridge for sale you might want to buy!

Prop 17 is just one more bait and switch scheme by the insurance industry. I urge you to take a look at your Voter Information Guide and compare the information in favor of Prop 17 with the actual text of the proposed law. There is a definite gap in the truth. For example:

"Yes on 17 eliminates an existing surgharge for changing insurance companies ... because you lose your continuous coverage discount." No such surcharge or discount should exist because insurance companies are not allowed to set rates based on continuous coverage.

"17 would allow drivers to take your continuous coverage discount with you if you change insurers." If Prop 17 passes there is nothing in the law stating an auto insurance carrier has to offer any discount premiums.

"No one is worse off with Prop 17." "It provides additional grace periods and protections you don't get now." Prop 17 does not provide a grace period. It simply "does not limit an insurer's ability to offer additional grace periods for lapses." That's quite different.

"17 adds protections for soldiers to maintain their continuous coverage discount if they cancel insurance when serving overseas or in another state." Prop 17 states that an insurer may deem continuous coverage "due to an applicant's or insured's absence from the United States while in military service." Nothing protects someone in the military serving in another state who may choose to let their auto insurance lapse because they don't have access to a vehicle and are not driving.

"17 adds protections for middle class families that have lapses in coverage for job losses, illnesses or other reasons during tough economic times." Only for 90 days. *Any* interruption in coverage for more than 90 days, other than being out of the United States due to military service, is considered a lapse in service.

Beware: "Every automobile insurer must have an approved "rate plan" that establishes its average premium. Within that rate plan, every "discount" requires a corresponding "surcharge" so that every factor influencing a rate will balance evenly over an insurer's book of business." (Title 10 of the California Code of Regulations, Section 2632.7(c))

Simply put, every discount in an automobile insurer's rating plan *must* be offset with a surcharge somewhere else in the rate plan. Don't let the insurance industry pull a bait and switch on you. Vote NO on Prop 17!

For further information:
Apr. 12, 2010 Press release on Insurance Commission Report regarding Mercury Insurance Group practice of overcharging consumers: Web Link

Text of Prop 17: Web Link

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