If Proposition 33 seems familiar, it ought to. It's the Son of Proposition 17, the Mercury Insurance-backed initiative that would have rewarded one group of customers at the expense of another -- to the overall benefit of the insurance industry. As opponents of Prop. 33 like to say, "When was the last time insurance companies spent millions to lower your rates?" We all know the answer. But that's only one reason voters should reject Prop. 33, just as they rejected its near-twin, Prop. 17, back in 2010.
Prop. 33, bankrolled almost solely by the founder of Mercury Insurance, billionaire George Joseph, would let insurance companies set rates based on whether a driver previously had auto coverage. It would give discounts to new customers who have maintained continuous coverage with other insurers and make up the difference on the rates they charge those who've had coverage lapses. Prop. 33 backers maintain that drivers already get a discount for obeying the law and for maintaining insurance coverage with their current provider -- but if they switch companies, they lose that discount. The truth is, no such discount exists.
Under current insurance regulations, customers get loyalty discounts for renewing their policies because long-term customers cost insurance companies less money, not because they obey the law. Insurers simply don't spend as much on marketing and administration for existing customers as on potential new customers. That savings has been vetted by insurance regulators. There is no proof, however, that a driver's length or continuity of coverage impacts risk. In fact, in order to give some people this so-called discount, insurance companies would have to increase rates for other drivers.
Who could see their rates jacked up? Anyone who halts their insurance coverage for any reason. If Aunt Erma stops her insurance because she's having surgery and can't drive for six months, she'll be charged more when she starts driving again. If Uncle Al has used public transportation for years but then moves to a city like Bakersfield where he will probably need to drive, he will be charged more.
Prop. 33 does carve out some exemptions: Active-duty military and those unemployed for up to 18 months wouldn't lose their discount. But Prop. 33 could still raise rates for drivers, even those with perfect driving records. In states with Prop. 33-like rules, drivers who buy insurance following a long lapse in coverage paid more: 61 percent more in Texas, 79 percent more in Nevada and 103 percent more in Florida.
Just as they did with Prop. 17 in 2010, voters should say no to this flawed and deceptive measure in November. California already has a well-regulated and competitive auto insurance market. Let's keep it that way.