A consumer advocate says it prompts insurers to raise rates on the poor
Contra Costa Times
SACRAMENTO – A bill decried by consumer advocates as special interest legislation aimed at benefiting one generous campaign contributor passed the Assembly on Thursday night and appears likely to clear the Senate as well.
SB689 by Sen. Don Perata, D-Oakland, would overturn rules recently written by Insurance Commissioner Harry Low that prohibit auto insurance companies from offering discounts to anyone who has bought insurance continuously for a certain length of time.
Companies are allowed to give the “persistency” discounts to their customers but may not offer them to others.
The change is sought by Mercury Insurance, a large Los Angeles firm that has used the practice in the past to help lure new customers. Mercury has contributed to two-thirds of the Legislature’s 120 members in the past two years and donated $25,000 to Perata in June right before a hearing on similar measure that a Senate committee killed.
Mercury also gave $150,000 to the campaign for Proposition 45, an initiative pushed by Perata but defeated in March that would have extended the length of time lawmakers could serve in office.
If enacted, the measure would prompt insurers to offer lower rates for middle-class customers and pay for them by jacking up rates on first-time buyers of insurance, most of whom are poor, said Doug Heller, a lobbyist for the consumer advocacy group, the Foundation for Taxpayer and Consumer Rights.
“The most appalling thing is a big insurance industry donor can convince lawmakers to turn their backs on their low-income constituents with their hands out to a contributor,” Heller said.
But Perata disputed Heller’s analysis and said the bill’s support speaks for itself. The measure, resurrected this week, passed the Assembly on a 58-12 vote.
“I think the bill gives insured drivers another rating factor to negotiate for lower rates and for discounts,” Perata said. “It’s flatly a very good bill for working people who have a hard time making, among other things, insurance payments.”
Heller said he thinks SB689 violates Proposition 103, the initiative that set up insurance regulation, and the measure would likely face a legal challenge if signed into law.