An initiative measure has qualified for the ballot this next voting period that will alter how premiums are calculated for drivers who have maintained their automobile insurance coverage in effect without a 90 day period of lapse. The initiative allows automobile insurance companies to offer a discount to a person even if they switch to a new carrier. The initiative is sponsored only by Mercury Insurance.
The Legislative Analyst, in preparing the ballot analysis asked for input from the state insurance department on whether there would be an increase in premiums to some drivers. They answered a resounding yes. Here is why.
Insurance companies must develop a rate plan that is complex and provides different tiers of coverage and rate options. One of the tiers is the discount offered to an existing insured that has maintained coverage.
Every discount must also have a surcharge, because the overall rate must be approved by the state so that insurance companies stay solvent and able to pay claims when needed. If a carrier wants to offer a discount to customers of another company, it must in turn surcharge its existing customers. Here is the department of insurance link for your use.
Common sense dictates that if a company loses good driver discounts to another carrier because the other carrier is aggressively advertising for customers, then they must increase their rates to all their existing customers. Therefore between insurers, there would be this constant increase in rate charges.
What is most disconcerting is the company that is promoting this ballot measure. They do not have a good reputation for treating claimants and their own insured’s well. See these blog and consumer reports for more information.
Mercury recently was hit with a $250,000 fine for claims violations reported to the commissioner. Many more claims go unaddressed because the Insurance Commissioner has been so slow to respond in the years past.
The insurance commissioner, after fining Mercury said, “It is vital that insurance companies put their customers first,” The California Department of Insurance (CDI) conducted a review of consumer complaints filed with the Department against Mercury Insurance, Mercury Casualty, and California Automobile Insurance Companies, collectively known as Mercury Insurance Group. Of the 121 files reviewed, a total of 258 violations, 258 were discovered to have occurred from January 2004 through December 2005. That is two per file reviewed and is an indication of fire where smoke was found. These violations involved several of the company’s claims-handling practices, including unreasonable delays in affirming or denying coverage and issuing claim payments.
Just say no to proposition 17.
James Ballidis is an attorney specializing in the handling of insurance and car accident claims.