Proposition 33 Benefits Calif. Drivers With Insurance But Those With Lapsed Coverage Would Pay More
CAVANAUGH: This is KPBS Midday Edition. I'm Maureen Cavanaugh. Our 2012 election coverage continues with proposition 33. It would make it easier for insured drivers to keep their continuous coverage discount even if they switch insurance companies. But it would also allow insurance companies to charge higher rates to drivers who let their insurance lapse. Erik Anderson prepared this feature on the measure. ANDERSON: The idea isn't new. In fact, proposition 33 is similar to the voter-rejected proposition 17 on the ballot two years ago. Essentially people who have had car insurance continuously for five years can get a discount. People who have had an interruption in coverage would face much higher car insurance fees. It adds some exceptions that include military, students, and children living with their parents. It's a message that supporters will put on TVs around the state. NEW SPEAKER: Prop 33 rewards drivers for maintaining car insurance with any company you choose and makes it easier for drivers to switch companies. ANDERSON: Rachel Hooper works for the yes on 33 campaign. She says current law only allows the current insurers a loyal discount. Prop 33 makes the market more competitive by making a continuous coverage discount affordable. NEW SPEAKER: 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 liked their customer service better. When he called the new company, they said they couldn't match what he was currently paying, his rate, because they can't give him that continuous coverage discount. ANDERSON: It is the second try to create a new provision in California's insurance marketplace. The owner of mercury insurance, a self-made billionaire, funded 2010's prop 17, and is a major supporter of prop 33. He spent nearly $15 million then and put up another $8 million this time. NEW SPEAKER: There's no secret that it's the personal funds of George Joseph. I think he really values competition in the marketplace and sees that if prop 33 passes, there's more competition, and it benefits consumers because with more competition you have lower rates. And that's what it's all about. &%F0 NEW SPEAKER: Voters have to ask themselves one question: When is the last time an insurance company executive spent $8 million to save you money on your car insurance? Everyone knows the answer is never. ANDERSON: Carmen works with consumer watchdog, an advocacy group that's opposing prop 33. Her group is working with a fraction of the budget of her opponents. Instead of television spots, their ads are online online. NEW SPEAKER: My name is Kyle, I'm a college right now, I can't afford a car as of now. But even if I could my school doesn't allow us to have them on campus. ANDERSON: She hopes voters see this as a retread of prop 17. The measure isn't about loyalty discounts, she says. NEW SPEAKER: That discount won't change. Prop 33 creates a new one. It will give some people a small discount for having prior insurance and will give people who didn't have prior insurance an increase in their auto insurance rates. ANDERSON: She says it makes a major change passed years ago. It created consumer protections in a marketplace that required coverage. NEW SPEAKER: Insurance companies can charge you more just because you don't have current insurance, just because of your history of insurance coverage. There was a way for the insurance industry to red line out customers they just didn't want to -- they didn't want to cover. ANDERSON: UC San Diego professor Thad Kousser says he's not surprised to see the issue back in front of voters just two years after a similar bill failed to get support. That he says is how California's direct democracy system works. Money can and does buy ballot access. NEW SPEAKER: What we see in the past, whether it's Pacific gas and electric's initiative, voters are often skeptical when there's one group behind a process that's supposed to be for all us all. ANDERSON: If it passes, about 80% of the covers drivers could qualify for a discount. CAVANAUGH: Joining me now is Harvey Rosenfield, who founded consumer watchdog, author of prop 103, and he is one of the key opponents of prop 33. I want to ask you not so much why you oppose proposition 33 but to give us some context. As I say, you're the author of prop 103 back in the '80s. It created consumer rules for auto insurance. Why did you write prop 103? What was going on in California's auto insurance market at that time? ROSENFIELD: Well, it was really pandemonium. Auto insurance companies were raising rates by 15%, 30%, 40% each year, and the State of California was the only major state in the nation that did not have any rules or laws that regulated insurance company rates or practices. It was like the wild west out here. We tried to get some bills through the legislature that would address insurance rates. Of the legislature was too beholden to the insurance company. So Harvey Johnson suggested we go to the ballot box. And the voters passed the laws that the public officials in Sacramento did not want to pass. CAVANAUGH: The proposition based rates on drivers' safety record, the number of miles driven, and the years of importance. What this prop 33 wants to do is add something and say it's also based on how long you have actually been insured. And the supporters say that thissic mas the market more competitive. Did you take that into account when you were making prop 103? Did those arguments surface at that time? ROSENFIELD: When it comes to surcharging people for not having prior insurance, everybody was in agreement that it shouldn't be done. The state's insurance commissioner, the state's Supreme Court, and the voters. These arguments never came up. And in fact, there is no such thing as continuous coverage. That's a misnomer. The issue of whether it would be fair to surcharge people just because they didn't buy the product previously, nobody quarrelled with that. Even the insurance industry in its campaign against prop 103 never attacked that. CAVANAUGH: Now, the consumer federation of America recently put out some stats about nondriving factors that might influence risk when it comes to drivers and insurance companies. And one of the things that was in that analysis was whether or not should be had continuous insurance coverage. And they linked that along with a number of other nondriving factors to the fact that those people who did have insurance were less of a risk. In that context, wouldn't it make any fair sense for insurance companies to be able to use that as a criterion? ROSENFIELD: Actually, there's a big dispute about whether you're a bigger risk if you don't have prior insurance. One of the studies we've seen shows that you are more of a risk if you change insurance companies. And we have challenged the insurance industry for years to prove that there's a relationship between being uninsured previously and getting into an accident. And the purpose behind the ban on it in proposition 103 was the voters clearly felt that that was an arbitrary basis upon which to surcharge people. As you pointed out earlier, the voters mandated that rights be primarily based on your driving safety record, years of driving experience, the number of miles you drive annually, and not factors that have to do with whether you're a good driver or not. CAVANAUGH: Doesn't just any every other state allow them to extend driver discount fist they switch insurance carriers? ROSENFIELD: That's correct. And when voters in California passed prop 103, they passed by far the toughest insurance regulation law in the nation. That's why our rates are much lower and have grown much more slowly than ratings in almost every other state in the nation. There's nothing like prop 103 anywhere else. And that's why the voters included this prohibition on using prior insurance coverage as a determinate of how should you should pay. CAVANAUGH: You've given us a really good background on this. Thank you so much. ROSENFIELD: You're welcome.
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 interruption 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.
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.
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.