Proposition 33 Benefits Calif. Drivers With Insurance But Those With Lapsed Coverage Would Pay More
Thursday, October 11, 2012
Harvey Rosenfield, is a consumer advocate who authored California’s insurance reform law, Proposition 103, which regulates the rates and policies of auto, home and business insurance companies. He is also founder of the Consumer Watchdog, one of the key opponents of Proposition 33.
California voters are getting a chance to tweak the state’s car insurance rules when they consider the fate of Proposition 33.
Proposition 33 on the November ballot asks votes to change the way car insurance rates are calculated in California. The measure proposes tweaking current rules to allow companies to consider drivers' insurance history when setting how much they will pay.
It is not a new idea. In fact, Proposition 33 is similar to Proposition 17, a measure voters rejected just two years ago. Essentially, people who have had car insurance continuously for five years can get a discount. People who have an i
nterruption in coverage would face much higher car insurance fees. In an effort to separate itself from the failed Proposition 17, Prop 33 adds some exceptions that include the military, workers who have lost their jobs and children living with their parents.
It is a message the "Yes on 33” camp is putting in television spots hitting the airwaves on stations around California, according to Rachel Hooper, a consultant for the campaign.
One ad features several drivers, including a young woman who calls it a great idea for all drivers. Another person in the ad says Prop 33 rewards drivers for maintaining car insurance.
Hooper argues the initiative makes the car insurance market more competitive by creating the continuous coverage discount and making it portable.
“I have a colleague who has insurance with one carrier. He’s had it for 20 years. And he wanted to go to a different carrier because he likes their customer service better,” said Hooper. “But when he called that new company, they said he couldn’t match what he was currently paying, they couldn’t match his rate because they couldn’t give him that continuous coverage discount.”
The owner of Mercury Insurance, self-made billionaire George Joseph, funded 2010’s Prop 17. He’s also the major supporter of Prop 33. Joseph spent nearly $15 million the first time he tried to get the car insurance rules changed. This time he has put up another $8 million.
“Yeah, its no secret that it’s the personal funds of George Joseph,” said Hooper. “But I think, he really values competition in the marketplace and sees that if Proposition 33 passed, there’s more competition. And that benefits consumers because if there’s more competition you have lower rates.”
It is not an argument that sits well with opponents of Proposition 33.
“Voters just have to ask themselves one simple question,” said Carmen Balber. “When was the last time an insurance company executive spent $8 million to save you money on your car insurance? Everyone knows the answer is, never.”
Consumer Watchdog is working with a fraction of the “Yes on 33” budget. Instead of television spots, the consumer advocate’s ads are online only. One features Kyle, a college student. He worries he will pay more for car insurance later because he doesn’t drive right now.
“With this new Proposition 33, it's going to make it even more difficult to afford car insurance on top of all the other loans and payments I’m going to have to make," he says. "It feels like I’m being punished.”
No driver should have to pay more for car insurance, according to Balber, just because they have not had continuous coverage for five years. Balber calls the measure a thinly-veiled retread of Prop 17, and said the initiative doesn’t affect loyalty discounts, those savings some companies give to longtime customers. She said making those discounts portable isn't what Prop 33 is about.
“This idea that you get to take your discount with you is completely wrong. That’s not what Prop 33 would do,” said Balber.
Prop 33 would create a new provision in California’s insurance law that bases rates on history of insurance coverage. That circumvents consumer protections put in place by California voters 24 years ago. Rules set up by the consumer-based measure, Proposition 103, primarily allow insurance companies to set car insurance rates based on a driver’s safety record, number of miles driven and years of experience. The law specifically prohibits companies from setting rates based on insurance coverage history.
“Insurance companies can’t charge you more just because you don’t have current insurance,” said Balber. “Just because of your history of insurance coverage. Because that was a way for insurance companies to just red line out customers that they just didn’t want to cover.”
UC San Diego professor Thad Kousser said there is a reason this issue is back in front of voters, so soon after voters defeated the measure. He said that's how California’s direct democracy system works. He said money can and does buy ballot access. However, it does not guarantee success.
“Well we’ve seen in the past, whether it's Pacific Gas and Electric’s initiative that failed in the past, this other Mercury Insurance initiative, is that voters are often skeptical when there’s one group behind this process that’s supposed to be for us all,” said Kousser.
If Prop 33 passes, about 80 percent of the state’s drivers could qualify for a continuous coverage discount. That discount will be paid for by drivers that don’t qualify, and they will likely end up paying substantially higher car insurance rates.