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history when setting rates and premiums. It would allow insurers to surcharge customers who had not purchased auto insurance at some point during the past five years, whether or not they had been driving. Consumer Watchdog estimates that those surcharges would increase premiums by as much as 40% or more for millions of Californians including students who went away for college, Californians who previously used mass-transit, and the long-term unemployed. To help stop the spread of misinformation and to combat the misleading campaign by Mercury Insurance and their front group the Agents Alliance we have complied a fact sheet:
Ma ss tr a ns it c ommut er s a nd B ic ycl e c ommut er s a nd urbanit es t ha t d ec id e d t o buy car insuranc e w ill b e p ena li z ed w it h a surchar ge .
Californians and new transplants that previously used mass-transit biked or walked, as their primary means of transportation would be hit with a surcharge. At a time when green-orientated policies are being prompted to help California drivers reduce traffic and smog Mercury Insurance would be penalizing this positive actions. In addition, when newly uninsured drivers face barriers to re-entering the insurance market, all insured drivers in California end up paying more for insurance in the form of higher premiums for “uninsured motorist coverage” and higher taxes to cover uninsured accidents The Insurance Research Council, an industry group, projects that the number of uninsured motorists will increase by nearly 17% by 2010 as a result of the economic downturn. In addition to making it substantially more expensive for the uninsured to get coverage, the Mercury initiative will lead to higher premiums for those who remain insured. When there are more uninsured, the price of “uninsured motorist coverage” goes up for everyone else.
This is a n a t t ack on t h e u n e m plo y ed a nd w or k ing famili e s bar ely m ak ing end s m e e t.
The long-term unemployed who drop coverage for over 18 months will be penalized with a surcharge. California currently has an unemployment rate of 12%; three percentage points above the national average. Families struggling to make ends meet, many of which have been unemployed since 2008, often cut unnecessary expenses like car insurance to ensure vital bills are paid: the mortgage, food, electricity, etc. As families start pulling themselves out of unemployment, often with jobs with substantially less pay, the last thing they deserve is to be hit with a surcharge. Additionally, many families who do not show up in the 12% unemployment number are already making ends meet with jobs that required a massive pay cut. These families similar to the unemployed do not deserve to be rewarded for their hard work and sacrifices to stay finically afloat with an insurance surcharge.
Stud ent s w h o d r o p c o v er a ge for C oll eg e w ill b e surchar ged .
College freshmen often are dropped from their parents insurance coverage to save money since may Colleges across the country have strict no freshmen with car rules. In addition most Colleges are designed to encourage a walking and biking to reduce traffic, save parking space and drastically cut down on the potential for drunk driving. Families in these tough economic times will cut their college-bound insurance policies to help save the family money. When these students return home from college or decided to become drivers they will be panelized for dropping insurance with a surcharge.
The surc har ge w ill r a is e r at es by 40% - 200% bas ed o n c om p ar is on in ot h er s t at es w it h M ercury Insuranc e.
Last year, the Campaign for Consumer Rights, which is the campaign affiliate of the nonpartisan, nonprofit Consumer Watchdog, released a video showing how Mercury surcharged a Nevada resident 73% for his premium because there are no Prop 103 protections in the Silver State. Mercury’s front group, Cal-FAIR, called the smoking gun video “lame and misleading,” saying that it was inappropriate to compare what would happen to California drivers under the initiative to the premium surcharges faced in Nevada. In the video, Proposition 103 author Harvey Rosenfield provides the evidence that in states where Mercury’s surcharge is legal, as in Nevada, Mercury’s surcharge proposal drives up premiums for good drivers who have done nothing wrong. The results are staggering: • • • In Texas, Mercury forces a person to pay 33% more. Mercury charges 74% more in Texas for a driver who didn’t previously have auto insurance because he did not have an automobile (and did not require insurance); In New York, a consumer faces as much as an 81% “no prior insurance” surcharge; and
In Florida, Mercury’s website quotes a 227% for a driver with a perfect record if he did not have insurance at the time he requested the policy.
Insuranc e is a z er o sum gam e. For e v er y “d is c ount ” y o u offer y ou n e ed a n e qua l surcharg e.
This is a deceptive campaign meant to hide the proposal's inherent attack on families struggling in these tough times. As the Court of Appeal explained, citing the California Department of Insurance’s senior actuary, when invalidating a nearly identical 2003 law sponsored by Mercury: “The premiums for policyholders who, because of their characteristics, do not qualify for a particular discount must be surcharged in an amount equal to the total of the discounts given to the policyholders that qualified for the discount.” [Emphasis in original] 132 Cal. App. 4th 1352, 1367-1369 The political consultants running Mercury’s latest anti-consumer campaign know that concerned Californians won't vote for an initiative that imposes an insurance surcharge, so they twist the facts. That is
why the Mercury initiative does not disclose that its initiative guts a key California protection against the practice of using prior insurance status in the setting of rates and premiums.
This Surc har g e w ill hurt C alifor nia’s Ec onom ic R ec o v er y
Consumers in states that currently allow for this practice could see a rate increase of 40% – 70% . That means instead of building the economy, consumers will be forced to spend their hard-earned money on a punitive surcharge, just to be able to drive a car across town. California should be looking for new ways to jumpstart the economy, not lengthen an already devastating recession.
Mercury Insuranc e C ha irma n G e or g e J os e p h is fund ing t his Init ia t i v e
Chairman George Joseph is currently the sole donor to this initiative; contributing over $8.1 million. The donations went to a political action committee called The 2012 Auto Insurance Discount Act, Sponsored by the American Agents Alliance with Support from California Insurance Providers for Competitive Prices and Consumer Discounts. The Agents Alliance, whose executive director was a spokesman for Mercury's 2010 initiative, is effectively run by Mercury Insurance with over 70% of the board being Mercury agents as of the Alliance's most recent corporate filing, according to consumer advocates. The group called California Insurance Providers for Competitive Prices and Consumer Discounts appears to be a fabrication created solely for this measure, as it does not appear to exist anywhere except within the name of this committee. The current proposal is very similar to voter defeated Proposition 17, which would repeal Proposition 103's ban on considering a driver's insurance coverage history when setting rates and premiums. It would allow insurers to surcharge customers who had not purchased auto insurance at some point during the past five years, whether or not they had been driving. Editorial Boards across the state described Mercury's Proposition 17 as: "a special interest scam" – San Jose Mercury News "a daunting additional cost for those who are desperate to get coverage" – San Francisco Chronicle "designed to fool voters" – Contra Costa Times "won't 'fix' anything" – Los Angeles Times Mercury Insurance has been prosecuted in civil courts for violating this provision of Proposition 103 that it now seeks to override. In 2003, when Mercury was illegally imposing the surcharge in California, Consumer Watchdog demonstrated that Mercury surcharged drivers without prior coverage by 41%. The company also has a long history of anti-consumer practices. In a regulatory filing relating to Mercury's illegal practices, the California Department of Insurance has written: Mercury’s lengthy history of serious misconduct, and its attitude – contempt towards and/or abuse of its customers, the Commissioner, its competition, and the Superior Court – are all relevant to determining the penalty needed to best ensure the protection of the public from future violations
and wrongdoing… Among Department [of Insurance] staff, consumer attorneys, and consumer victims of its bad faith, Mercury has a deserved reputation for abusing its customers and intentionally violating the law with arrogance and indifference. ###