Initiative Granting Discounts for Continuous Coverage to Be Included on California Ballot

A controversial measure affecting automobile insurance in California has been approved to be placed on the ballot for the upcoming 2012 elections in November.

California Attorney General Kamala Harris has granted approval to the 2012 Automobile Insurance Discount Act, which would allow California drivers to receive a discount for continuous coverage, even if they switch insurance companies.

Under current California law, only the insurer who wrote a consumer's auto insurance policy can offer discounted rates to well-performing drivers. According to the proposed language of the new measure, the ballot initiative would include exceptions to the continuous coverage requirement for interruptions caused by military service, loss of employment, and children living with their parents. The measure would also apply to people who have had lapses of less than 90 days during the past five years (Best's News Service, June 8, 2011).

But the ballot measure has drawn fire from consumer groups that argue the bill would unfairly affect consumers who opt not to have automobile coverage for a period of time, even in instances where the consumer no longer has a vehicle to insure.

Richard Holober, executive director of the Consumer Federation of California, said the ballot measure was "discriminatory" toward those who go without coverage for a few months, including people who didn't need a car to get to their job, but who had to purchase one when they got a new employer. It could also include people who were disabled for a period of time and who allowed their coverage to lapse, Holober said.

"As we have seen in the past, just having coverage does not demonstrate driving performance," Holober said. "This measure would have a similar effect to how pre-existing conditions affect people who purchase health insurance."

Holober's organization and other consumer groups defeated a similar measure, then dubbed Proposition 17, in 2012. Proposition 17 lost by two percentage points in that election after groups such as USAA Insurance, which writes policies for members of the U.S. military, lobbied against it (Best's News Service, July 19, 2010).

This new ballot measure, which would receive a new number when it goes on the ballot, is virtually identical to Proposition 17, Holober said.

The Proposition 17 was supported by Mercury Insurance in 2010, which shelled out millions in support of its passage. The company said in August 2012 it spent $12.1 million to support it (Best's News Service, Aug. 2, 2010).

Efforts to reach Mercury Insurance were unsuccessful.

In 2010, the top five writers of private passenger auto in California were Farmers Insurance Group, with 15.06% market share; State Farm Group, with 12.95%; Allstate Insurance Group, with 8.74%; Mercury General Group, with 8.4%; and Auto Club Enterprises Insurance Group, with 8.15%, according to BestLink.

(By Jeff Jeffrey, Washington Correspondent: jeff.jeffrey@ambest.com)