Mercury Insurance Bill Opposed by Low-Income and Consumer Groups Would Restrict Insurance Commissioner's Ability to Block Unfair and Discriminatory Practices
Santa Monica, CA -- A proposal to allow insurance companies to implement illegal and discriminatory practices, if the practice had previously been approved for another company by the Insurance Commissioner, passed out of the Senate on a 31-0 vote today. Consumer and low-income groups oppose SB 1291 (Burton), because it would take away the Insurance Commissioner's ability to regulate insurance companies on an individual basis as is required by voter-approved Proposition 103.
According to consumer advocates with the Foundation for Taxpayer and Consumer Rights (FTCR), the current version of the bill would partly deregulate insurance in California and eviscerate Proposition 103's requirement that insurance companies justify their own rate and rule changes before implementing them. During the floor debate, Senator Burton agreed to amend the bill in order to ensure that it does not violate or obstruct Proposition 103's rules, but it is unclear what else the bill does other than violate Proposition 103, except to potentially diminish the Commissioner's power to block illegal discrimination by insurers.
Mercury Insurance, which has actively sought the bill's passage, has not provided lawmakers or the public with any real-life problems that insurance companies have encountered that would be addressed by this bill. FTCR argues that lawmakers should not proceed with a bill that would undermine consumer protections, particularly since there has been no explanation of what the bill is meant to do or why it is actually needed.
"Insurance regulation does not work on a one-size-fits-all basis and letting one company copy whatever another company does, without scrutiny, ignores the fact that insurance companies are different. To properly protect all consumers requires regulatory oversight of all companies," said FTCR's Executive Director, Douglas Heller.
FTCR, Consumers Union, Public Advocates and the California Reinvestment Committee warned Senators that if SB 1291 is enacted it could force the Commissioner to approve illegal surcharges on consumers, simply because one company had previously been able to sneak the illegal practice through the regulatory process. The groups have noted that surcharges and other discriminatory practices typically impact the poor the most severely. According to FTCR, the public would be better served by rules more aggressively punishing insurance industry wrongdoing than by making it legal to discriminate just because another company has discriminated.
"Mercury Insurance wants the rules to be changed so that if one insurance company is getting away with murder, all insurers are allowed to get away with it," said Heller. "The legislature should be looking for ways to make sure illegal practices are punished more swiftly, rather than requiring the commissioner to abide by a two-wrongs-make-a-right standard."