Company purportedly violated significant insurance reform initiative
By Kenneth Araullo, INSURANCE BUSINESS
Consumer Watchdog filed a petition to intervene in an enforcement action initiated by the California Department of Insurance (CDI) against Mercury Insurance Group. The allegations revolve around accusations of overcharging, misleading practices, and discrimination against California homeowners and motorists.
Consumer Watchdog’s involvement in the case will focus on the company’s purported violations of Proposition 103, a significant insurance reform initiative established in 1988. The CDI has accused Mercury of 29 different violations of this law, including overcharging good drivers and other motorists, penalizing motorists for not previously carrying insurance, charging unauthorized rates, and implementing discriminatory rates.
Consumer Watchdog noted that Mercury had previously promised CDI it would cease many of these practices, which are unlawful under Proposition 103, but allegedly continued to violate the law.
“Mercury has consistently refused to obey the rules California voters put in place with Proposition 103 to stop price-gouging and practices that discriminate against those who can least afford it. Previous investigations and multimillion-dollar penalties have clearly failed to deter the company from wrongdoing. Mercury, as a repeat offender, must pay a steep price or no insurer will bother to obey the law. Consumer Watchdog looks forward to working with CDI prosecutors to bring Mercury to justice – which we believe means barring Mercury from doing business in the state,” Consumer Watchdog staff attorney Benjamin Powell said.
Dating back to as early as 1995, this is at least the third time since 2004 that CDI has charged Mercury with violations of Proposition 103’s consumer protections and other state laws. The charges in the current actions are, in many instances, for the same illegal conduct as uncovered in prior examinations by the CDI.
Consumer Watchdog played a key role in a 2004 CDI noncompliance action against the insurer. That led to Mercury paying a record $41 million in penalties and interest. CDI filed another noncompliance action against Mercury in 2014 and issued a $1 million fine in that action.
In the current action, Consumer Watchdog will make the case for CDI to issue the highest penalty because of Mercury’s recidivism – license suspension or revocation – if the allegations are proven true at trial.
Mercury is the third largest auto insurer and sixth largest home insurer in the state.
Mercury’s current predicament stands in direct opposition to a distinction it earned earlier this year, with the insurer being named as one of the world’s best insurance companies for 2023 in the auto category, according to Forbes.