For several years Mercury Insurance[Related: State Insurance Commissione…][Related: Hold Health Insurance Indus…][Related: How Health Insurance Rate R…][Related: State Insurance Commissione…][Related: Hold Health Insurance Indus…][Related: How Health Insurance Rate R…] and lobbyists for insurance brokers have desperately tried to change California’s insurance rules governing who is an insurance broker who gets to charge customers an unregulated fee and who is an insurance agent who is prohibited from tacking on a fee. Sounds obscure enough, but tens of millions of dollars (at least) are at stake. A few years back a California court ruled against Mercury Insurance’s improper relationship with many of the so-called brokers who charged customers fees but were essentially acting as insurance agents for Mercury. (A broker is allowed to charge a fee because they are working exclusively for the customer and aren’t beholden to a company.) When Mercury lost the case, they turned to the Legislature looking for politicians (to whom they donate generously) to overturn the rules. So far the Mercury-broker alliance has failed to muster political support to increase the gouging. (When you put it that way…who would vote for it?)
The rumor mill has it that the chief lobbyist for the brokers, John Norwood (opens in new tab) (paid almost $400K by the Insurance Brokers and Agents of the West in 2007) is trying to make another go at the bill this year. Norwood, who also tends to get payment from Mercury (including $100K in ’05-’06, has been around the block stumping for the insurance industry knows the Sacramento game and will play it to the hilt, sending plenty of campaign money from the insurance companies to politicians, but I suspect his bill will meet the same fate this year.
There are a lot of reasons that this bill should fail. 1) It probably violates Proposition 103’s prohibition on unregulated, undisclosed premium charges. 2) A number of insurers see it as an attempt by a few insurers to change the rules of he game to give companies like Mercury an unfair competitive advantage in the advertising wars, because it would allow Mercury to hide its broker fees and falsely claim they charge lower rates than the other guys. 3.) The bill will raise auto insurance prices, and what politician wants that on his or her record?
We will be watching this over the course of the year.
