California Proposition 17, Car Insurance "Persistency Discounts" (June 2010)
If Proposition 17 had passed, it would have allowed insurance companies in the state to give what are known as "persistency discounts" to new customers. "Persistency discounts" are discounts for those who have had continuous or nearly continuous auto insurance coverage.
Under current law in California, an insurance company can offer a persistency discount to its own customers, but under the terms of Proposition 103, auto insurers can't offer that same discount to new customers who had continuous coverage for some period of time but from a different auto insurance company. Proposition 17 would give insurance companies the right to offer persistency discounts to customers of other insurers who have not let their policies lapse for more than 90 days in the previous five year period.
Mercury Insurance was Proposition 17's primary sponsor. Mercury Insurance was responsible for about 98% of the funding for the "Yes on 17" campaign, having contributed $14.6 million.
California has 23.7 million licensed drivers who collectively pay billions of dollars in auto insurance premiums. Currently 80% of drivers maintain auto insurance and qualify for a persistency discount. About 20% of California's drivers fall into the category of those who have had lapses in their insurance coverage to the extent that they would not be eligible for the persistency discounts allowed both under current law and Proposition 17.
These final election results are from the California Secretary of State June 8, 2010 results page.
Ballot label details
Ballot title: "Allows Auto Insurance Companies to Base Their Prices in Part on a Driver's History of Insurance Coverage. Initiative Statute."
Official ballot summary:
Permits companies to reduce or increase cost of insurance depending on whether driver has a history of continuous insurance coverage. Fiscal Impact: Probably no significant fiscal effect on state insurance premium tax revenues.
Fiscal impact estimate:
The fiscal estimate provided by the California Legislative Analyst's Office says:
- This measure could result in a change in the total amount of automobile insurance premiums earned by insurance companies in California and, therefore, the amount of premium tax revenues received by the state for the reasons discussed below.
- On the one hand, the provision of continuous coverage discounts could reduce premium tax revenues received by the state. This would depend, however, on the extent to which insurers choose to offer such discounts to their customers, and the size of the discounts provided. On the other hand, insurers offering such discounts could make up for some or all of these discounts by charging higher premiums to some of its other customers.
- The net impact on state premium tax revenues from this measure would probably not be significant. This is because overall premiums are predominately determined by other factors—such as driver safety, the number of miles driven, and years of driving experience—which are unaffected by the measure.
"Californians for Fair Auto Insurance Rates" (Cal-FAIR), is "a coalition of consumer advocates, businesses, ethnic organizations, taxpayers, and insurers" that supported Proposition 17.
The Cal-FAIR coalition included:
To view a complete coalition list, go to www.yesprop17.org/about
Mercury Insurance, the primary sponsor of Proposition 17, is an automobile and property insurance company founded by George Joseph in 1961. The company's headquarters is in Los Angeles, California.
As the campaign for Proposition 17 kicked off, Mercury Insurance was smacked by a hard-hitting report from California's Department of Insurance which says that Mercury has a "lengthy history of serious misconduct" and an attitude of "contempt toward and/or abuse of its customers, the [insurance] commissioner, its competition and the Superior Court." Kathy Fairbanks of Bicker, Castillo & Fairbanks said the report was an attempt to muddy Proposition 17's message of insurance discounts for the 80% of California insurance customers who would qualify for a discount under its provisions.
Arguments in favor
- Proponents argue that the initiative allows drivers to take their continuous coverage discount with them if they decide to change auto insurance companies – saving drivers up to $250 a year.
- Under current law, drivers who have maintained auto insurance with the same company are eligible for a continuous coverage discount. However, a flaw in law prohibits drivers from taking this continuous coverage discount with them if they switch insurance companies.
- Responsible drivers who maintain their insurance coverage pay a surcharge of hundreds of dollars if they switch insurance companies, because they lose their continuous coverage discount.
- Proposition 17 ends that penalty and allows drivers to keep their continuous coverage discount even if they change insurers. The 80% of responsible drivers who maintain automobile insurance should not be penalized and lose their discount just because they change insurance companies.
- Just as drivers are able to keep their good driver discount if they change insurance companies, they should be able to keep their continuous coverage discount.
- Proposition 17 rewards responsible drivers by allowing them to shop for the lowest rate while maintain their continuous coverage discount. The measure will increase competition in the auto insurance market and provide drivers with more choices and lower auto insurance rates.
- In response to the assertion by opponents that in Nevada, a typical middle aged man with a modest car in Nevada would be charged $1,488 for a six-month policy if he had had a lapse in coverage versus $835 if he had persistently had coverage, a Yes on 17 spokesperson said, "Opponents’ objection to a measure that will benefit more than 80 percent of California consumers is baffling and unequivocally anti-consumer. And attempts to compare our California-specific measure to a fictional example in Nevada is a misleading and lame attempt to make a connection where none exists."
One campaign committee, named the "Yes on 17-Californians for Fair Auto Insurance Rates and Mercury General Corporation and Affiliates", filed on behalf of a "yes" vote on Proposition 17. This group raised approximately $15.8 million, nearly all of it from Mercury Insurance.
Political consultants who provided paid services to the "Yes on 17" campaign included:
- National Petition Management, which was paid $2,273,745 to collect signatures to qualify Proposition 17 for the ballot.
- Barger & Wholen: $64,712
- Bicker, Castillo & Fairbanks: $390,000
- Goddard Clausen Strategic Advocacy: $549,667
- Lombardo Consulting: $27,500
- Nielsen, Merksamer, Parrinello, Mueller & Naylor: $472,087
- Public Opinion Strategies: $167,000
- Consumers First, paid $30,000 through February 9.
Many of the individuals and groups who passed Proposition 103 in 1988 have come out swinging against Proposition 17 including Harvey Rosenfield, who fears the impact Proposition 17 would have on low-income Californians. 
- "Consumer Watchdog", a group based in Santa Monica, opposes the initiative. A spokesperson for the group said they believe that the impact of Proposition 17 will be to charge more, or deny coverage altogether, when an insurance applicant has a gap in coverage.
- Opponents launched a website, "Stop the Surcharge", in December 2009. "Stop the Surcharge" takes the focus off policy and puts it on several executives of Mercury Insurance, who, the website alleges, are "living the high life".
- In its infancy, the proposal drew criticism from Michael Hiltzik, a Los Angeles Times columnist, who said it is "essentially the latest attempt by Mercury to eviscerate Proposition 103. That's the 1988 ballot measure that dramatically reshaped insurance regulation in this state by giving an elected insurance commissioner the authority to approve property and casualty rates before they go into effect."
Opponents of the measure argue:
- In other states where Mercury Insurance does business, it charges "whopping surcharges" to customers who have had a lapse in their coverage and, opponents say, this is "smoking gun" proof that Mercury Insurance will do the same thing in California, if they are legally allowed to by this measure.
- Higher rates charged in other states for customers with persistency lapses means "...Mercury has been lying to the public, telling its customers, reporters and the attorney general’s office that this is not going to raise anybody’s rates, and that’s a lie. The last thing we need now in an economy in which people are struggling to pay their bills is an insurance company swindling a few hundred dollars a year out of our own pockets."
- Proposition 17 is a rate hike in disguise because it "...allows insurance companies to surcharge people who have not been previously insured -- even if they are perfect drivers who weren't insured because, for a time, they weren't driving. Proposition 17 also penalizes anyone who had to drop coverage for more than 90 days during the last five years, or missed just one insurance payment."
- Main article: Donations to California's 2010 ballot propositions
The "No on 17" campaign raised about $1.5 million in donations. The three largest donors were:
- Campaign for Consumer Rights: $572,538
- California Nurses Association/California Nurses Association Initiative PAC: $332,000
- Consumer Attorney's Initiative Defense PAC/Consumer Attorney’s Issues PAC: $306,772
The Campaign for Consumer Rights doesn't identify its donors. The "Yes on 17" campaign said that a campaign finance violation might have occurred and on May 10, filed a request with the California Fair Political Practices Commission that an investigation be conducted. The "Stop Prop 17" campaign denies that there is anything to the complaint.
"Yes on 17"
- The Orange County Register is urging voters to vote "yes" on Proposition 17. Their editorial says “competition would benefit motorists,” and that Proposition 17 takes insurance pricing “in the right direction.”
- The Marysville Appeal-Democrat: "When phone users stood to lose their longtime telephone numbers if they switched providers, phone companies held them captive. When the law changed to permit consumers to take their numbers with them to a new provider, competition flourished, and prices dropped."
- The Redding-Record Searchlight: Proposition 17 will "increase competition in the auto-insurance market and reward responsible consumers.”
- Palm Springs Desert Sun: "About 80 percent of California motorists are responsible and keep their policies up to date, saving an average of $250 as a reward. If they see a better deal from a competitor, they shouldn’t be held back by the prospect of losing the discount."
"No on 17"
- The San Francisco Chronicle is urging its readers to vote "no" on Proposition 17, saying, "The Proposition 17 formula is likely to produce, at best, a marginal benefit to Californians shopping for a new company - and a daunting additional cost for those who are desperate to get coverage."
- The Los Angeles Times is urging a "no" voting, saying, "Another problem with Proposition 17 that proponents can't explain away is that insurers will have to offset the expected revenue loss from the new discount by raising rates on the people who don't qualify for it. By proponents' estimates, 80% of California drivers qualify for the loyalty discount, which means that the 20% who don't qualify pay a surcharge. But more than 80% of drivers have been continuously covered by various insurers, so more people will be eligible for the discount — and the fewer people who remain will have to pay for it."
- The Sacramento Bee: "Stand by the 1988 law that protects consumers, and turn back this self-serving measure sponsored by one firm."
- The Los Angeles Daily News: "...the analysis by the Legislative Analyst that will appear on the ballot makes it clear that Mercury, or any other insurer, could indeed impose surcharges under Proposition 17."
- Contra Costa Times: "Californians should have no trouble figuring out how to vote on Proposition 17, the auto insurance measure. All they have to do is ask themselves if Mercury Insurance Co., which spent $3.5 million to qualify and support the initiative, has consumers' welfare or its own financial interests in mind."
- San Jose Mercury News: "Proposition 17, like PG&E's anti-competitive Proposition 16, is the opposite: a special interest scam that would increase corporate profits and potentially harm consumers. The only way to discourage this abuse of initiatives is for voters to say an emphatic no when the worst ones come along."
- Press Democrat: "The state should be doing more to help uninsured drivers obtain coverage, not laying more traps to ensure they stay away."
- Redding Record-Searchlight: "Proposition 17 is a wholly owned subsidiary of Mercury General Corp., an insurance company that has poured more than $3.5 million so far into the effort to change car-insurance regulations."
- Santa Cruz Sentinel: "The measure, if passed, would offer negligible benefits to Californians shopping for a new carrier, while adding significant costs to people who can hardly afford insurance."
- Bakersfield Californian: "Proposition 17 isn't about lowering the cost of insurance; it's about raising the cost for those who can least afford it."
- San Gabriel Valley Tribune: "These are just some of the surcharge opportunities made possible by Proposition 17, which throws out the rules of the true voter-approved insurance reform measure, 1988's Proposition 103, and inserts caveats that will nickel and dime future policy holders."
- The Marin Independent-Journal: "The proposition would open the door for insurance companies to attract customers from competitors by offering a discount for having continuous coverage for the past five years. Current law prevents insurers from offering that discount until after six months. This is one of those changes that deserves airing in legislative hearings and public debate."
- The Lompoc Record: "The real outcome of passing Proposition 17 is that rates would skyrocket for many drivers, essentially forcing a high percentage of them to forego insurance coverage, thus putting even more uninsured drivers on our roads. Not a good idea."
Ballot title and arguments
Ballot title criticisms
Harvey Rosenfield, who wrote Proposition 103 in 1988, criticized Jerry Brown, the California Attorney General for re-writing the measure's ballot title. The ballot title was re-written in October after its supporters provided a revised version of their initiative. The October revision of the ballot title did not refer to the fact that insurance premiums will go up for some drivers if the initiative is approved, whereas the first version of the ballot title did allude to that reality.
Mercury General, a leading sponsor of this initiative, gave $13,000 to a Jerry Brown campaign committee in June 2009.
Brown's office said they re-wrote the ballot title after initiative sponsors submitted a revised version of their proposition. Brown's critics say that the revised version is not different enough from the original version to justify the change in ballot title.
Ultimately, when Jerry Brown's office provided a ballot title in February 2010 when the California Secretary of State's office was preparing the official voter guide for the June 8 election, the final ballot title did allude to the possibility of increased insurance rates for some drivers. Harvey Rosenfield lauded the new ballot title, saying, "The (new) ballot pamphlet, which is provided to all California voters, is going to be very important in an election where Mercury Insurance will spend millions of dollars to deceive the voters about its Proposition 17. Thanks to a diligent review by the attorney general, voters will know that many Californians will be subject to huge surcharges if Proposition 17 passes."
The language that was added in the February 2010 ballot title that pleased Rosenfield is, "will allow insurance companies to increase cost of insurance to drivers who do not have a history of continuous insurance coverage."
Lawsuits about ballot arguments
"Yes" against "No"
On February 25, the "Yes on 17" campaign filed a lawsuit against the "No on 17" campaign to "force Proposition 17 opponents to make changes to their ballot arguments and ballot rebuttals and correct the patently false and misleading statements contained therein." The "Yes on 17" campaign wanted the court to order a re-write of the opposition's ballot arguments before March 15, which is the statutory deadline for resolving all ballot language issues before the Official Voter's Guide goes to press.
The lawsuit asserted that the ballot arguments and rebuttals submitted by Proposition 17 opponents were wrong in these ways:
- The "No on 17" arguments say that Proposition 17 creates new penalties for those who have insurance lapses but, according to the supporters of Proposition 17, that's not true.
- If rates increase for California motorists, said "Yes on 17" supporters in their lawsuit, this is because of existing laws and should not be blamed on Proposition 17: "As a result, repeated statements in the ballot arguments by opponents that Proposition 17 will increase rates for motorists are false and misleading. Any such increases are the result of existing law, not Proposition 17."
"No" against "Yes"
On March 4, "No on 17" mainstay Harvey Rosenfield filed a lawsuit in Sacramento County Superior Court, urging the court to remove from the official voter's guide what he characterized in the lawsuit as false and misleading statements made by the "Yes on 17" side.
The material that Rosenfield thought should be removed from the official voter guide before it is mailed to voters included:
- The assertion that soldiers living stateside are exempt from Proposition 17's surcharges.
- The assertion that Californians already are charged using the continuous-coverage factor that Proposition 17 will put in place. Contrary to this, Rosenfield says in his lawsuit, the surcharge Mercury Insurance wants voters to approve by voting for Proposition 17 is currently illegal.
The court's decision
Sacramento Superior Court judge Allen H. Sumner ruled on March 12. Sumner declined to honor most of the ardently expressed desires of both the "Yes on 17" side and the "No on 17" side for a variety of changes in Proposition 17's ballot language and ballot arguments.
- Kept the official wording of the ballot summary intact.
- Ruled in favor of Yes on 17 and determined No on 17's claim that Proposition 17 punishes military personnel to be false and misleading and ordered it omitted from the ballot pamphlet. No on 17 attorneys immediately appealed this decision and asked the judge to instead allow them to submit new language.
- Ruled in favor of Yes on 17 and revised No on 17 ballot arguments about a potential maximum surcharge.
Path to the ballot
- See also: California signature requirements
On December 14, 2009, proponents announced that they had collected 720,000 signatures to qualify the measure for the 2010 ballot, versus a requirement of 433,971. On January 20, 2010, the California Secretary of State announced that the measure had qualified for the June 8, 2010 ballot. It was the 5th ballot proposition to qualify for the June 8, 2010 ballot.
National Petition Management was hired to collect the signatures to qualify the measure for the ballot. Through February 9, 2010, campaign finance reports filed by the measure's sponsors show the petition drive management company as having been paid $2,273,745 for their signature-gathering efforts. This amounts to an average charge of $3.15 per signature, if the campaign collected 720,000 signatures as was reported in the press.
- California Stop Insurance Overcharges Act (2010)
- California Prohibit Discrimination in Insurance Rates Based on Policy History (2010)
- Official Voter Guide to Proposition 17
- Official title, summary and analysis of Proposition 17, as they appear in the state's official voter guide
- Proposition 17 arguments, pro and con, and rebuttals, as they appear in the state's official voter guide
- Guide to Proposition 17 from the California Voter Foundation
- Guide to Proposition 17 from the League of Women Voters
- Easy Voter Guide to Proposition 17
- Guide to Proposition 17 from the Institute of Governmental Studies
- Who endorses/opposes Proposition 17? from the Institute of Governmental Studies
- Californians for Fair Auto Insurance Rates
- Campaign finance reports of "Yes on 17-Californians for Fair Auto Insurance Rates and Mercury General Corporation and Affiliates"
- Stop the Surcharge
- Stop Prop 17
- Campaign finance reports of "Stop Prop 17: Sponsored by Campaign for Consumer Rights, a Coalition of Consumer Advocates, Nurses and Consumer Attorneys"
- Campaign finance reports of "Californians for Progress, No on 23, a Coalition of Consumers and Dennis Herrera" (This campaign committee, although its name makes an explicit reference to Proposition 23, is listed on the official state government website for campaign finance as an opposition committee to Proposition 17.)
- ↑ 1.0 1.1 1.2 1.3 Los Angeles Times, "Battle heats up over auto insurer's initiative on California's June ballot", February 15, 2010
- ↑ Full LAO analysis of Proposition 17
- ↑ Capitol Weekly, "Initiative backers submit paperwork promising a busy 2010 cycle", October 22, 2009
- ↑ List of large donors to CFAIR
- ↑ Californians for Fair Auto Insurance Rates, Campaign website
- ↑ 6.0 6.1 6.2 Mercury News, "Mercury's ballot measure 'lies' about auto insurance rate increases", January 20, 2010
- ↑ 7.0 7.1 7.2 7.3 7.4 7.5 Expenditure details for "Yes on Proposition 17" campaign
- ↑ Capitol Weekly, "Insurers, critics face off over customer ‘discounts’", November 5, 2009
- ↑ Press release, "StopTheSurcharge.org Exposes the Riches of Mercury Insurance Execs - and the Costs to Californians of Their New Ballot Initiative", December 22, 2009
- ↑ Los Angeles Times, "Mercury General using guise of benevolence to assault Proposition 103", July 2, 2009
- ↑ Insurance Corner, "California Labor Union Opposes Auto Insurance Increase", April 16, 2010
- ↑ Los Angeles Times, "California Democratic Party convention wrap-up", April 19, 2010
- ↑ The Reporter, "Prop 17: It's a rate hike in disguise", May 2, 2010
- ↑ California Watchdog, "'No on 17' funding questioned", June 4, 2010
- ↑ Orange County Register, "Proposition 17 partial fix of bigger problem", April 21, 2010
- ↑ Marysville Appeal-Democrat, "Proposition 17 partial fix of bigger problem", April 24, 2010
- ↑ Redding Record-Searchlight, "Proposition 17 would drive insurers to compete", May 14, 2010
- ↑ San Francisco Chronicle, "Chronicle recommends 'no' on Proposition 17", April 18, 2010
- ↑ Los Angeles Times, "No on Proposition 17", April 28, 2010
- ↑ Sacramento Bee, "Corporate-sponsored measures: No on Props. 16 and 17", April 25, 2010
- ↑ Los Angeles Daily News, "No on Prop 17", April 17, 2010
- ↑ Contra Costa Times, "Vote no on deceptive Proposition 17", March 16, 2010
- ↑ San Jose Mercury News, "Special-interest Proposition 17 won't benefit drivers", April 4, 2010
- ↑ Press Democrat, "No on 17", April 23, 2010
- ↑ Redding Record-Searchlight, "A truly bad ballot initiative takes money", April 20, 2010
- ↑ Santa Cruz Sentinel, "Vote No on Prop 17", May 6, 2010
- ↑ Bakersfield Californian, "Proposition 17 likely to encourage fewer insured drivers", May 6, 2010
- ↑ San Gabriel Valley Tribune, "Our View: Proposition 17 has too many tricks - vote 'no'", May 6, 2010
- ↑ Marin Independent-Journal, "IJ's choices for state propositions", May 10, 2010
- ↑ Lompoc Record, "Initiatives, confusion in primary", May 14, 2010
- ↑ San Francisco Chronicle, "Jerry Brown accused of caving in to donor", October 29, 2009
- ↑ 32.0 32.1 32.2 San Francisco Chronicle, "Brown changes ballot language on Prop 17", February 24, 2010
- ↑ 33.0 33.1 33.2 33.3 PR Newswire, "Yes on Prop 17 Campaign Sues No on 17 Campaign", February 25, 2010
- ↑ 34.0 34.1 34.2 Inside Bay Area, "Countersuit filed over auto-insurance measure's ballot arguments", March 4, 2010
- ↑ Consumer Watchdog, Brief filed in Sacramento Superior Court on March 12, 2010 regarding Proposition 17 ballot language and arguments
- ↑ Huffington Post, "Jerry Brown's Role as Truthsayer Could Give Him The Advantage Over Megabucks Whitman", March 11, 2010
- ↑ 37.0 37.1 Los Angeles Times, "Judges review language of state ballot measures", March 13, 2010
- ↑ Sacramento Bee, "Auto insurance rates initiative proponents to submit signatures", December 14, 2009
- ↑ CFAIR expenditure report
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