Auto insurance bill on bumpy road to Senate

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Sacramento Bee

SACRAMENTO, Calif. — Industry-sponsored legislation making it cheaper for some consumers to switch auto insurance carriers – but more expensive for others – is expected to face Senate scrutiny Wednesday.

Critics of the Mercury Insurance-sponsored bill say the measure goes against the will of the voters – expressed in Proposition 103 – and would hurt the poor more than it helps good drivers.

The bill, SB 841, by Sen. Don Perata, D-Oakland, varies slightly from a Perata bill vetoed by Gov. Gray Davis last year.

Like last year’s bill, this one includes a provision allowing auto insurers to charge higher rates to people who have had lengthy lapses in coverage.

That provision has some consumer rights advocates up in arms.

“The question is, should you be discriminated against when your only mistake or problem is you couldn’t afford to maintain your insurance?” asked Doug Heller of The Foundation for Taxpayer and Consumer Rights.

The new version would give military personnel a two-year grace period and allow other consumers to have their insurance lapse for up to 90 days without penalty.

Davis has not taken a position on the new legislation, his office said Tuesday.

Industry analysts say the bill would help Mercury reposition itself and gain market-share from competitors.

The company currently carries a large percentage of low-income drivers and is dwarfed by several competitors. If the bill becomes law, the company would be able to charge more to those seeking insurance after a lapse in coverage and offer a discount to competitors’ customers who’ve had insurance consistently.

Current law says only your present insurer can offer a discount for staying with the company for a number of years.

Opponents of the bill said it violates the will of the voters as stated in Proposition 103, the landmark 1988 auto insurance initiative.

“The voters said it doesn’t matter what you all in the Legislature think, ‘We don’t want you to surcharge them,’ ” said Heller, referring to drivers who have had lapses in coverage.

Mercury officials say allowing customers to take the discount with them from carrier to carrier is in the consumers’ interest.

“People should be able to take this discount with them and shop the market,” said George Joseph, the company chief executive officer. Joseph said opponents are missing the fact that the bill would benefit most customers.

He also said it makes sense to charge more to people who drop their insurance because, as a group, they are a greater risk. Because state law requires insurance, drivers with lapsed coverage either have driven illegally or may have diminished driving skills, he said.

Heller said someone who had insurance, then dropped their coverage for a year would be unfairly punished when they decide they want to drive again.

Consumer Watchdog
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