The latest insurance scam

Mercury Insurance wants to buy your vote again — this time, with an unusual ally
|
()
Who pays? Mercury Insurance wants to change the rules for pricing car insurance.

steve@sfbg.com

Mercury Insurance and its billionaire founder George Joseph are trying, for the second time in two years, to charge infrequent drivers more for car insurance.

Only this time, the measure has the surprising support of a progressive advocacy group that represents low-income communities of color — and that recently received a substantial donation from Mercury.

Proposition 33 — which so far has received fairly little news media attention in an election dominated by talk of taxes — is a reprise of a similar measure, Prop. 17, that went down to defeat in 2010.

The measure seeks to allow insurance companies to set premiums based in part on whether consumers have had continuous coverage. In other words, Mercury wants to raise rates on people who take a break from driving for economic, environmental, or other reasons.

The new measure contains a few exemptions targeted at sympathetic groups singled out by opponents in the last campaign, including active-duty soldiers and those unemployed due to layoffs.

And Prop. 33 also has a significant new backer, the Berkeley-based Greenlining Institute.

That alliance has drawn the ire of Consumer Watchdog, the nonprofit group that created California's regulated car insurance system with Prop. 103 in 1988 and has been fighting to defend it ever since.

"It raises rates on the people that Greenlining claims to represent," Consumer Watchdog President Jamie Court told us.

GOLDEN STATE GOLD

Mercury got its start in the 1960s, selling insurance to car owners who had spotty records, charging high rates — and aggressively challenging claims. About 80 percent of its business is in California.

And Mercury has been trying for some time to challenge the landmark Prop. 103, the 1988 ballot measure that set tight regulations on what car-insurance companies can charge — and what they can use to set rates.

Under that law, insurance companies can only use three basic rating factors: how long someone has been driving, vehicle miles traveled per year, and a driver's safety record. There are 16 more factors that the state has allowed to have a smaller impact on rates, including the "persistency discount" that rewards drivers for staying with a single company.

Court said there are good reasons for that discount, noting that it costs companies more to market to and administer new customers than to serve existing ones.

Prop. 33 would allow consumers to shop around and still keep that discount — something that Court said only makes sense if you want to give insurance companies the power to divide customers by class and punish people who choose to give up driving for a while.

"It's sleight of hand," Court said. "Some drivers get a discount, everybody else is going to get a surcharge."

Two years ago, every single legitimate consumer group in the state opposed Mercury's efforts. So why is the prominent Greenlining Institute changing its tune?

Greenlining says the new measure is better. But the group's staffers also acknowledge that Mercury is now a significant donor to Greenlining. Joseph appeared as a panelist at Greenlining's 19th Annual Economic Summit in April, and the company donated $25,000 at that time.

Greenlining General Counsel Sam Kang, who pushed for the new position and is the designated point person in defending the stance, told us the new exemptions make the measure worth supporting. "The protections are what really distinguish Prop. 17 from Prop. 33," Kang said. "It's better than what we've got now."

Kang argues that the increased competition it could foster among insurance companies might lower premiums for everyone. "If customers are willing to walk away" from their current insurance provider and still keep their continuous coverage discount, Kang told us, "that's how it will drive down rates."

Also from this author