California Proposition 33, History of Automobile Insurance Discount Initiative (2012)

California Proposition 33
Election date November 6, 2012
Topic Insurance
Status d Defeated
Type State statute	Origin Citizens

California Proposition 33 was on the ballot as an initiated state statute in California on November 6, 2012. It was defeated.

A "yes" vote supported allowing insurers to set prices based on whether the driver previously carried insurance coverage with any insurance company over the last five years.

A "no" vote opposed allowing insurers to set prices based on whether the driver previously carried insurance coverage with any insurance company over the last five years.

Election results

See also: 2012 ballot measure election results

California Proposition 33
Result		Votes	Percentage
Yes		5,510,282	44.99%
No		6,737,571	55.01%

Results are officially certified.

Source

Measure design

Proposition 33 would have allowed insurers to set prices based on whether the driver previously held insurance coverage with any insurance company. Insurers would have been able to offer discounts to new customers who could prove they were continuously covered by any licensed auto insurance company over the last five years and increase the cost of insurance to drivers without continuous coverage over the previous five years. These discounts are known as "persistency discounts" or "loyalty discounts" and under current California law, insurance companies can only offer them to existing customers.

Proposition 33 was similar to Proposition 17, which was on the June 8, 2010 ballot. Proposition 17 was narrowly defeated. Unlike Proposition 17, Proposition 33 exempted soldiers and those who have been unemployed for 18 months or less from paying more after a lapse in persistency.

As of 2012, about $21 billion worth of automobile insurance is sold every year in California.

Full text

The full text can be read below:

This initiative measure is submitted to the people in accordance with the provisions of Section 8 of Article II of the California Constitution.

This initiative measure adds a section to the Insurance Code; therefore, new provisions proposed to be added are printed in underline type to indicate that they are new.

PROPOSED LAW

SECTION 1. Title

This measure shall be known as the 2012 Automobile Insurance Discount Act.

SEC. 2.

The people of the State of California find and declare that:

(a) Under California law, the Insurance Commissioner regulates insurance rates and determines what discounts auto insurance companies can give to drivers.

(b) It is in the best interest of California insurance consumers to be allowed to receive discounted prices if they have continuously followed the state's mandatory insurance laws, regardless of which insurance company they have used.

(c) A consumer discount for continuous automobile coverage rewards responsible behavior. That discount should belong to the consumer, not the insurance company.

(d) A personal discount for maintaining continuous coverage creates competition among insurance companies and is an incentive for more consumers to purchase and maintain automobile insurance.

SEC. 3. Purpose

The purpose of this measure is to allow California insurance consumers to obtain discounted insurance rates if they have continuously followed the mandatory insurance law.

SEC. 4.

Section 1861.023 is added to the Insurance Code, to read:

1861.023. (a) Notwithstanding paragraph (4) of subdivision (a) of Section 1861.02, an insurance company may use continuous coverage as an optional auto insurance rating factor for any insurance policy subject to Section 1861.02.

(b) For purposes of this section, "continuous coverage" shall mean uninterrupted automobile insurance coverage with any admitted insurer or insurers, including coverage provided pursuant to the California Automobile Assigned Risk Plan or the California Low-Cost Automobile Insurance Program.

(1) Continuous coverage shall be deemed to exist if there is a lapse in coverage due to an insured's active military service.

(2) Continuous coverage shall be deemed to exist even if there is 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.

(3) Continuous coverage shall be deemed to exist even if there is a lapse of coverage of not more 90 days in the previous five years for any reason.

(4) Children residing with a parent shall be provided a discount for continuous coverage based upon the parent's eligibility for a continuous coverage discount.

(c) Consumers who are unable to demonstrate continuous coverage shall be granted a proportional discount. This discount shall be a proportion of the amount of the rate of reduction that would have been granted if the consumer had been able to demonstrate continuous coverage. The proportion shall reflect the number of whole years in the immediately preceding five years for which the consumer was insured.

SEC. 5. Conflicting Ballot Measures

In the event that this measure and another measure or measures relating to continuity of coverage shall appear on the same statewide election ballot, the provisions of the other measures shall be deemed to be in conflict with this measure. In the event that this measure shall receive a greater number of votes, the provisions of this measure shall prevail in their entirety, and the provisions of the other measures shall be null and void.

SEC. 6. Amendment

The provisions of this act shall not be amended by the Legislature except to further its purposes by a statute passed in each house by roll call vote entered in the journal, two-thirds of the membership concurring.

SEC. 7. Severability

It is the intent of the people that the provisions of this act are severable and that if any provision of this act, or the application thereof to any person or circumstance, is held invalid such invalidity shall not affect any other provision or application of this act which can be given effect without the invalid provision or application.

This is a summary of the initiative's estimated fiscal impact on state and local government prepared by the California Legislative Analyst's Office and the Director of Finance.

	Probably no significant fiscal effect on state insurance premium tax revenues.

Support

Logo of the "Yes on 33" campaign

Supporters

Individuals

• Former California State Senator Don Perata (D)
• Juan Vargas (D-San Diego), former Chair of the Assembly Insurance Committee
• Milo Pearson, former Deputy Commissioner for Rate Regulation at the California Department of Insurance
• Willie Brown, Former Democratic Speaker of the Assembly
• Jim Brulte, Former Republican Senate Minority Leader
• Former Lieutenant Governor of California, Cruz Bustamante

Organizations

• California Republican Party
• USAA
• American Legion
• Veterans of Foreign Wars (VFW) of California
• American GI Forum
• California Hispanic Chambers of Commerce
• The Greenlining Institute
• Peace Officers Research Association of California (PORAC)
• CDF Firefighters Local 2881
• California Association of Highway Patrolmen
• American Agents Alliance
• Slavic American Chamber of Commerce
• Merced Filipino Chamber of Commerce
• Greater Bakersfield Chamber of Commerce
• Asian American Business Women’s Association
• Asian Business Association of Orange County
• Asian Americans in Commercial Real Estate
• Council for Asian American Business Associations
• Southeast Asian Community Center
• Asian Business Association of Los Angeles

• Chinese Chamber of Commerce of Los Angeles
• AP3CON
• Global Network Solutions
• Corona Hispanic Chamber of Commerce
• Hispanic Chamber of Commerce Alameda County
• South Bay Latino Chamber of Commerce
• San Francisco African American Chamber of Commerce
• The Greater Phoenix Urban League
• Central Valley Asian Pacific American Chamber of Commerce
• Salvadoran American Leadership Fund
• Annenberg Chinese Students and Alumni Association
• Chinese American Citizens Alliance
• Search to Involve Pilipino Americans
• South Bay Association of Chambers of Commerce
• Rosemead Chamber of Commerce
• Central Valley Asian Pacific American Chamber of Commerce
• Asian American Business Women Association
• Valley Industry and Commerce Association

Arguments

• Don Perata, the former California State Senate president pro tempore, said, "This initiative does what most states have done successfully and allows the consumer to control the discount. This is not a party issue. This is a fairness question, and as a legislator and policymaker, I always supported the portability of this discount. It just makes sense."
• Milo Pearson, former Deputy Commissioner for Rate Regulation at the California Department of Insurance, wrote, "Proposition 103 was passed in 1988 and, with one exception mentioned below, eliminated the ability for drivers to move to another auto insurance company and take the persistency discount with them. It is my view that Proposition 103 has done many good things for automobile insurance consumers over the years, but this is not one of them. It is simply unfair to penalize the vast majority of drivers in this state who follow the law by not allowing this discount to be portable. Opponents of Proposition 33 argue that insurance premiums for that small percent of drivers who drive without insurance will increase substantially if Proposition 33 passes. However, there is absolutely no evidence that this will be the case."
• Pete Conaty, a retired U.S. Army lieutenant colonel and veteran's advocate, wrote, "When California had a law similar to Prop. 33 from 1996 to 2002, rates did not go up and the number of uninsured motorists dropped by almost half. This incentive to bring the uninsured into the system has earned Prop. 33 the support of the California Association of Highway Patrolmen, which wants safer streets and more insured drivers.The provisions and benefits found in Prop. 33 would offer millions of California drivers while addressing a real problem specific to veterans and others who experience a lapse in their policies. Prop. 33 helps veterans save money upon re-entry into civilian life."

Official arguments

The official arguments presented in favor of Proposition 33 in the state's official voter guide were submitted by Robert Wolf, president of CDF Firefighters; Estercita Aldinger, small business owner; and Dean Lee, Veterans of Foreign Wars (VFW):

“

CALIFORNIA CONSUMERS DESERVE A REWARD FOR FOLLOWING THE LAW AND PURCHASING CAR INSURANCE. PROPOSITION 33 LETS YOU SHOP YOUR DISCOUNT FOR A BETTER DEAL. California law requires all drivers to buy automobile insurance. Approximately 85% of California drivers follow the law and buy insurance. If you follow the law and maintain continuous automobile insurance coverage, you are currently eligible for a discount, but only if you stay with the same insurance company. Current law punishes you for seeking better insurance or trying to get a better deal by taking away your discount for being continuously insured. Proposition 33 corrects this problem and offers this discount to consumers who maintain automobile insurance with any company. Proposition 33 allows you to shop for a better insurance deal. Leaders from both parties, Democrats and Republicans, the Veterans of Foreign Wars (VFW), the American GI Forum of California, firefighters, small business owners, individual consumers, and Chambers of Commerce join in their support of Proposition 33. VOTE YES ON PROPOSITION 33. It rewards those who follow the law. The reward you get for being responsible and following the law is yours to keep under Proposition 33, even if you exercise your right to move to a different insurance company. That is why some insurance companies like Proposition 33 and others don’t. It creates competition. Your neighborhood insurance agents support Proposition 33 because it will force insurance companies to compete for your business. We encourage you to read Proposition 33. It is simple. It makes sense. VOTE YES ON PROPOSITION 33 because you should get the discount that you have earned, regardless of which insurance company you pick. Proposition 33 also encourages those who don’t have insurance to obtain it, because Proposition 33 makes it easier to earn the continuous coverage discount. You get a share of the discount for every full year you are insured. The longer you are insured, the greater the discount. This encourages uninsured drivers to become insured and make our roads safer. Proposition 33 provides other protections as well: If you are active military, Proposition 33 says you will not lose the discount. That’s why our military families, led by the American GI Forum and Veterans of Foreign Wars, say Yes on Proposition 33. If you are laid off or furloughed, Proposition 33 allows you to keep your status as a continuously covered driver for up to 18 months. Under Proposition 33, driving age children get the discount whether they are living with their parents or are away at school. Proposition 33 allows you to miss payments for 90 days for any reason and remain eligible for this discount. Proposition 33 will result in more competition between insurance companies and better insurance rates because you will be able to shop around for insurance without losing your discount. In California, you must have automobile insurance. You deserve a reward for following the law. VOTE YES ON PROPOSITION 33.

”

Opposition

Logo of the "No on 33" campaign

Opponents

• California Alliance for Retired Americans
• California Democratic Party
• California Federation of Teachers
• California Labor Federation
• California Nurses Association
• Consumer Action
• Consumers for Auto Reliability & Safety
• Consumer Federation of California
• Consumers Union (publisher of Consumer Reports magazine)
• Consumer Watchdog
• Mexican American Legal Defense and Educational Fund
• National Organization for Women California
• Older Women’s League of CA
• Alliance of Californians for Community Empowerment
• American Federation of State, County and Municipal Employees
• Bend the Arc: A Jewish Partnership for Justice
• Berkeley-East Bay Gray Panthers
• Black Economic Council
• Breakthrough Communities
• California Bike Coalition
• California Church Impact
• California Conference of Machinists

• California Young Democrats
• Center for Sustainable Neighborhoods
• Chinese American Institute for Empowerment
• Courage Campaign
• CREDO
• Equal Justice Society
• Friends Committee on Legislation of California
• Former California Insurance Commissioner and Congressman John Garamendi
• International Federation of Professional & Technical Engineers, Local 21
• Jericho, Voice for Justice
• Latino Business Chamber of Greater Los Angeles
• Latino Voter’s League
• Lutheran Office of Public Policy
• Morongo Basin Democratic Club
• National Asian American Coalition
• PolicyLink
• PresentePAC+
• Public Advocates
• Public Employees Union, Local 1
• Service Employees International Union 1000 California
• The Public Interest Law Project/California Affordable Housing Law Project
• The Utilities Reform Network
• United Policyholders
• Urban Habitat

Arguments

• Mark Savage, senior attorney for Consumers Union (publisher of Consumer Reports magazine): "Prop 33 will give insurance companies far more power to raise rates on millions of good drivers who deserve a break, not a rate hike. Allowing insurance companies to base their auto premiums primarily on continuous coverage will make insurance coverage unaffordable for many low-income drivers."
• Carmen Balber, consumer advocate for Consumer Watchdog: “Lies and deception are at the heart of this insurance billionaire’s campaign for Prop 33, because he can’t win if the public knows the truth: Prop 33 allows insurance companies to charge good drivers more.”
• Richard Holober, executive director of the Consumer Federation of California, said, "When was the last time a billionaire insurance magnate spent a fortune to save you money? Never. This proposition is nothing more that [sic] an insurance tycoon's self-enrichment scheme."

Official arguments

The official arguments in opposition to Proposition 33 presented in the state's official voter guide were submitted by Harvey Rosenfield, founder of Consumer Watchdog; Elisa Odabashian, director of West Coast Office and State Campaigns, Consumers Union, the policy and advocacy division of Consumer Reports; and Nan Brasmer, president of California Alliance for Retired Americans:

{{Quote Consumer advocates agree: NO ON PROPOSITION 33 —It’s another deceptive insurance company trick to raise auto insurance rates for millions of responsible drivers in California. Mercury Insurance spent $16 million on a similar initiative in 2010. Californians rejected it.

Now they’re at it again. Mercury Insurance’s billionaire chairman George Joseph has already spent $8 million to fund Proposition 33. When was the last time an insurance company billionaire spent a fortune to save you money?

Proposition 33 unfairly punishes anyone who stopped driving for a good reason but now needs insurance to get back behind the wheel. Proposition 33 'will allow insurance companies to increase cost of insurance,' according to the Attorney General’s Official Summary—even on motorists with perfect driving records.

Proposition 33 is a cleverly worded initiative that says one thing and does another. Beware: the California Department of Insurance has said the so-called 'continuous coverage discount' scheme 'will result in a surcharge' for many California drivers.

That’s why Consumers Union, the policy and advocacy division of Consumer Reports, opposes Prop. 33. Proposition 33 raises insurance rates for students completing college who now need to drive to a new job. Proposition 33 raises insurance rates for people who dropped their coverage while recuperating from a serious illness or injury that kept them off the road.

Prop. 33 deregulates the insurance industry, making big insurance companies less accountable—which is why this measure is 99% funded by an insurance billionaire whose company, Mercury Insurance, has a record of overcharging consumers. The California Department of Insurance says Mercury has 'a deserved reputation for abusing its customers and intentionally violating the law with arrogance and indifference.'

No on 33: It penalizes responsible drivers who did not need auto insurance in the past. Prop. 33 allows insurance companies to charge dramatically higher rates to customers with perfect driving records, just because they had not purchased auto insurance at some point during the past five years. Drivers must pay this unfair penalty even if they did not own a car or need insurance at the time.

No on 33: It hurts California’s middle-class families.

In states where the Proposition 33 surcharge is legal, the result is HIGHER PREMIUMS:

• Texans can pay 61% more.
• Nevadans, 79% more.
• Floridians, 103% more.

No on 33: It leads to more uninsured motorists, costing us all more.

According to the California Department of Insurance, the financial penalty insurance companies want to impose 'discourages [people] from buying insurance, which may add to the number of uninsured motorists and ultimately drives up the cost of the uninsured motorist coverage for every insured.'

MORE UNINSURED DRIVERS hurts taxpayers and the state.

No on Prop. 33: Californians already rejected a nearly identical proposal in 2010. Let’s make it clear to these powerful special interests that No means No.

Don’t give insurance companies more power to raise our rates.

VOTE NO on PROP. 33. It’s too good to be true.

Learn more at http://www.StopTheSurcharge.org}}

Media editorials

See also: Endorsements of California ballot measures, 2012

Support

2012 propositions
June 5
Proposition 28
Proposition 29
November 6
Proposition 30
Proposition 31
Proposition 32
Proposition 33
Proposition 34
Proposition 35
Proposition 36
Proposition 37
Proposition 38
Proposition 39
Proposition 40
Donations • Vendors
Endorsements • Full text
Ballot titles • Fiscal impact
Local measures

• The Orange County Register: "When it comes to pricing insurance, it's best to match risk and reward, and the only way to match risk with reward is by using information about past behavior. Insurance markets fail when that information is not forthcoming. Or when it is deliberately withheld, as it currently is in California, thanks to Proposition 103, passed in 1988."

• The Redding Record Searchlight: "Allowing a comparable discount for drivers who've been insured under any company will increase competition for drivers' business, and in the long run that can only be good for overall rates."

Opposition

• The Bakersfield Californian: "Just as they did with Prop. 17 in 2010, voters should say no to this flawed and deceptive measure in November. California already has a well-regulated and competitive auto insurance market. Let's keep it that way."

• The Bay Area Reporter: "While purporting to save drivers money, this initiative statute really gives insurance companies virtually unlimited authority to hike rates."

• The Contra Costa Times: "Proposition 33: Insurance changes: We recommend no. Billionaire George Joseph, chairman of Mercury Insurance, is back again with a new version of the law voters rejected two years ago."

• The Daily Democrat (Woodland, California): "This is another blatant attempt by insurance billionaire George Joseph to change auto insurance law in a way that helps his company, Mercury General Corp."

• The Fresno Bee: "California voters have a basic question to answer when deciding Proposition 33, a self-interested initiative funded by billionaire George Joseph, founder of Mercury General Corp. Should Mercury and other auto insurance companies be allowed to charge higher rates for people who are new to auto insurance, or are reentering the auto insurance market after having dropped coverage? The answer should be a resounding no."

• The Long Beach Press-Telegram: "One of the most irritating things about California's flawed initiative process is that any well-heeled special interest with an agenda can waste voters' time with a self-interested ballot measure, and bombard them with ads that make it sound as though it benefits the voters instead of the promoter. Doubly irritating is when the special interest doesn't take no for an answer but wastes our time and his money on another attempt."

• The Los Angeles Daily News: "There is no good reason such people should be punished for their nondriving period. Once they need or are able to drive again, the law says they have to buy insurance. When they comply with that law, they should not be hit with a surcharge that could last five years."

• The Los Angeles Times: "Proposition 33 might help Mercury induce more drivers to switch insurers. But raising the cost of coverage for those without insurance doesn't help anyone on California's roads."

• The Marin Independent Journal: "This is an example of a change that deserves to be vetted by legislative hearings."

• The Merced Sun-Star: "Any discount for some motorists requires a rate increase for others."

• The Modesto Bee: "Don’t let George Joseph hijack that process to advance narrow economic agendas. Voters said no to Mercury in 2010, and should say no again on Proposition 33."

• The North County Times: "We see no reason to change the current ban on charging higher rates to the previously uninsured. A person's likelihood of causing a vehicle collision tomorrow would not seem to hinge on whether they had insurance last week or not."

• The Press-Enterprise: "...a different and self-interested agenda drives this measure: poaching lucrative customers from rivals while encouraging less desirable customers to go elsewhere. Californians have no reason to reward that kind of special-interest scheme."

• The Sacramento Bee: "Current law seeks to ease the entry of people new to auto insurance and the re-entry of others who have gone off insurance for a time. In today's harsh economy, many drivers are looking for ways to cut expenses, and unfortunately may eliminate auto insurance. We should not change state law in a way that would discourage motorists from buying insurance. Nor should we encourage them to drive uninsured, which costs all of us."

• The San Bernardino Sun: "It's a retread of the 2010 ballot proposition, and it deserves rejection too."

• The San Diego Union-Tribune: "It is a ballot measure built on a misperception and driven by an assumption that hasn’t been proved."

• The San Francisco Chronicle: "The owner of Mercury Insurance wants to loosen state insurance laws so he can offer more discounts. Consumer activists warn that the change will lead to significant surcharges on new customers."

• The San Francisco Bay Guardian: "The bottom line is this is about Joseph's bottom line, and he isn't spending tens of millions of dollars in order to save you money."

• The San Jose Mercury News: "Voters should once again see through Mercury's longstanding attempts to change state insurance law in a way that would not only discourage some motorists from buying auto polices, but would also encourage them to drive without any coverage, which costs the rest of us."

• The Santa Cruz Sentinel: "Voters should once again see through Mercury's longstanding attempts to change state insurance law in a way that would not only discourage some motorists from buying auto polices, but would also encourage them to drive without any coverage, which costs the rest of us."

• The Ventura County Star: "In The Star's view, any proposal that would tend to increase the number of uninsured drivers is a bad move. It's a threat to everyone on the road, including conscientious drivers who might enjoy the discount Proposition 33 is dangling in front of voters on Nov. 6."

Polls

See also: Polls, 2012 ballot measures

The California Business Roundtable, in conjunction with Pepperdine University, conducted polls on Proposition 33.

Date of Poll	Pollster	In favor	Opposed	Undecided	Number polled
October 7-10, 2012	California Business Roundtable	54.0%	34.3%	11.7%	830
October 21-28, 2012	California Business Roundtable	48.8%	37.4%	13.8%	2,115

Path to the ballot

See also: California signature requirements

Sponsors of Proposition 33 needed to collect 504,760 signatures by January 9, 2012 to qualify the measure for the ballot. Its supporters turned in over 800,000 signatures in mid-November 2011, several months before the deadline. On January 18, 2012, the California Secretary of State announced that the initiative had qualified for the ballot.

The letter requesting a title and summary for Proposition 33 was signed by Mike D’Arelli. D'Arelli is the executive director of the American Agents Alliance, an insurance trade group.

Cost of signature collection:

The cost of collecting the signatures to qualify Proposition 33 for the ballot came to $1,700,916.

The signature vendor was Arno Political Consultants.

See also: California ballot initiative petition signature costs

Lawsuits

See also: List of ballot measure lawsuits in 2012

Sacramento County Superior Court lawsuit

Supporters of Proposition 33 filed a lawsuit in Sacramento County Superior Court saying that the ballot title and summary provided by the Attorney General of California are inaccurate and misleading. The lawsuit also said that arguments opposing Proposition 33 submitted for the state's official voter guide by its opponents are inaccurate. The lawsuit asked that the title be changed, and that what supporters said are inaccurate arguments from opponents not be allowed into the voter guide.

In the part of the lawsuit that sought to have the official ballot summary changed, supporters said, "The Ballot Label and Ballot Title and Summary prepared by the Attorney General for Proposition 33 contain inaccurate language that is highly likely to prejudice voters against the measure...Specifically, the Ballot Label and Ballot Title and Summary state that Proposition 33 changes current law to allow insurance companies to 'set prices.' This is not true. Under California law, insurance companies cannot simply set prices, and Proposition 33 will not change this fact." The lawsuit needed to be resolved before August 13, when the official voter guides go to press.

In the part of the lawsuit that objected to arguments filed against Proposition 33 by its opponents, the lawsuit said that the anti-argument that said "Proposition 33 unfairly punishes anyone who stopped driving for a good reason but now needs insurance to get back behind the wheel" should be stricken from the voter guide in its entirety because, they said, this statement is "false and misleading."

Sacramento Superior Court Judge Timothy Frawley rejected the lawsuit.

External links

Suggest a link

Basic information:

• Complete November 6, 2012 official voter guide
• Ballot title, summary and LAO analysis of Proposition 33

Supporters:

• "Yes on Proposition 33" website
• "Yes on Prop 33" on Facebook
• "Yes on Prop 33" on Twitter
• Campaign finance reports for the "Yes on 33" campaign committee

Opponents:

• "Stop the Surcharge", a website in opposition to Proposition 33
• "No on Prop 33"
• Campaign finance reports for the "No on Prop 33" campaign committee, which is identified as "Californians for Real Insurance Reform, Sponsored by the Consumer Watchdog Campaign