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Mercury Insurance chair puts $8 mil into initiative

By Josh Richman
Monday, September 12th, 2011 at 12:25 pm in ballot measures, campaign finance.

Ready for a redux of last year’s narrowly unsuccessful Proposition 17, Mercury Insurance Chairman George Joseph has just dumped almost $8.1 million into a nascent ballot measure campaign.

The Secretary of State’s campaign finance database shows a $8,077,126.97 contribution from Joseph to the 2012 Auto Insurance Discount Act was made with an Aug. 26 transaction date and a Sept. 9 filing date. That’s atop $150,000 Joseph had given earlier.

That means this proposed ballot measure already has half the funding that was raised in total to support Prop. 17. Joseph appears to be the only donor to the committee so far.

Like Prop. 17, this measure would repeal state law’s prohibition – enacted under Proposition 103 of 1988 – on insurance companies from considering a driver’s coverage history when a motorist applies for insurance. Here’s the Attorney General’s official title and summary:

CHANGES LAW TO ALLOW AUTO INSURANCE COMPANIES TO SET PRICES BASED ON A DRIVER’S HISTORY OF INSURANCE COVERAGE. INITIATIVE STATUTE. Changes current law to permit insurance companies to set prices based on whether the driver previously carried auto insurance with any insurance company. Allows insurance companies to give proportional discounts to drivers with some prior insurance coverage. Will allow insurance companies to increase cost of insurance to drivers who have not maintained continuous coverage. Treats drivers with lapse as continuously covered if lapse is due to military service or loss of employment, or if lapse is less than 90 days. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local government: Probably no significant fiscal effect on state insurance premium tax revenues. (11-0013.)

Mercury Insurance, which bankrolled Prop. 17, has said such a measure would let insurers give “persistency discounts” to new customers who have had continuous or nearly continuous auto insurance coverage in the past. Current law lets insurers offer such discounts to its own customers but not to new customers who had continuous coverage for some period of time but from a different auto insurance company.

But there’s a flip side, consumer advocates opposing such measures warn: higher rates for customers without a history of continuous insurance. They say Mercury Insurance already levies surcharges on customers in other states who have had a lapse in their coverage – perhaps including students who went away to college, mass-transit commuters and the long-term unemployed – and so can be expected to do the same in California if such a measure passes.

Prop. 17 was defeated in June 2010, 51.9 percent “yes” to 48.1 percent “no.”

“Mercury Chairman George Joseph does not care that voters already rejected his deceptive campaign in 2010. He is determined to destroy consumer protections that have saved California drivers over $62 billion,” Brian Stedge of Consumer Watchdog said in a news release. “The question is simple, would an insurance chairman spend over $8 million to give drivers a discount? The truth is that Mercury will spend tens of millions of dollars in order to raise prices, not lower them.”

The new ballot measure is sponsored “by the American Agents Alliance with support from California Insurance Providers for Competitive Prices and Consumer Discounts,” according to the Secretary of State’s office. Consumer Watchdog says the alliance is run by the person who served as spokesman for Prop. 17 last year, and most members of its board of directors are Mercury agents.

Supporters have until Jan. 9 to gather valid signatures from at least 504,760 registered voters in order to put the measure on next year’s ballot.

UPDATE @ 4:26 P.M.: I got a call this afternoon from Rachel Pitts of Sacramento-based Marketplace Communications, representing the committee behind this ballot measure. She said she wanted to make it clear that Joseph’s contribution was out of his personal fortune, and that Mercury Insurance itself isn’t funding the measure; she went on to give me a thumbnail profile of Joseph as a spry 90-year-old California native and World War II combat veteran who still walks to work every day, “a true California success story.”

Pitts knocked Consumer Watchdog as a special-interest group that has gotten rich from the insurance intervenor fees it created under Prop. 103, and she said it’s dirty politics for such a group to go after someone like Joseph who has done so much for California.

Perhaps more relevantly, she said this measure is significantly different than Prop. 17. For one thing, it deems continuous coverage to have existed if there was a lapse due to a person’s active military service – a change that brought servicemembers’ and veterans’ insurer USAA, which had opposed Prop. 17, into the fold for this one.

Pitts said the new measure also deems continuous coverage to have existed even if there was a lapse in coverage of up to 18 months in the last five years due to loss of employment resulting from a layoff or furlough. Young, new drivers get the same rate as their parents, she said, and drivers get a discount proportional to the amount of full years they have had insurance in the previous five years.

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