Auto Insurance Discounts At Issue With Proposition 33

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In the wake of the attacks on the American Consulate in Libya, Consumer Watchdog told the “Yes on Proposition 33” campaign to stop running misleading ads.

Just after the anniversary of Sept. 11, the “Yes on Prop. 33” campaign ran ads promoting the auto insurance reforms in Proposition 33 as patriotic. The ads stated that the proposition will help the military by allowing by allowing active-duty personnel to keep their auto insurance discounts — even if they have gaps in their coverage while serving overseas.

But critics say the ads were misleading because Proposition 33 would not allow foreign workers, such as the ambassador to Libya, to qualify for the same auto insurance discount.

“To bring Libya into this is sinful and wrong,” said Terry McHale, political consultant to the “Yes on 33” campaign. “Every major veteran group in California supports Prop. 33.”

The American Legion, Veterans of Foreign Wars and Vietnam Veterans of America are among the groups that have endorsed Proposition 33.

But opponents of Proposition 33 say the exemptions for active-duty military are meant to hide the fact that the new rating factor would allow insurance companies to raise rates on many other consumers who have had a lapse in coverage, including the disabled, poor and people who use public transportation.

“The purpose of the initiative is to allow insurance companies to charge more or less based on previous insurance coverage,” said Jamie Court, president of Consumer Watchdog, a consumer advocacy group based in Santa Monica. “They’re lying to folks who will be really hurt under this proposal.”

We now have a national crisis with people from embassies coming back to the United States, said Court.

“And they will not be getting this [exemption] when they come back,” he said.

Proposition 33 would enable auto insurance companies to consider a new factor when setting insurance policy rates. Insurance companies would be able to use a consumer’s insurance coverage history as a factor.

If a driver has had constant insurance coverage with any company, insurance agencies could offer the driver a “continuous coverage discount.” If a driver did not have continuous coverage, the insurance companies could decide to give the driver proportional discounts, or to raise rates on the driver.  

Proponents of Proposition 33 tout the initiative as a means of promoting competition and discounted rates. Opponents say Proposition 33 will unfairly raise rates on certain groups of people.

The proposition would exempt active duty military personnel who have had a lapse in insurance coverage, as well as people who are unemployed for less than 18 months and people who lost coverage for less than 90 days.

McHale did not dispute the fact that diplomats would not be exempt from having a lapse in coverage under Proposition 33. But diplomats would qualify for proportional discounts, he said.

Under today’s law, diplomats lose their persistency discount the day they lose insurance coverage, said McHale but, under Proposition 33, foreign service workers could still receive a proportional discount.

Proposition 33 would allow for insurance companies to potentially give a proportional discount to people who have had some coverage over the past five years. For example, if a person had been insured for two of the past five years, they would be eligible for 40 percent of the “continuous coverage” discount.


Creating competition

Proposition 33 would allow consumers to take their “continuous coverage discount” and shop around with other insurance companies. Under current law, consumers are not allowed to take their discounts to other companies.

Currently, an insurance company can choose to give a “loyalty discount” to a customer who has maintained coverage with it, but a competing insurance company could not offer this same discount to a new customer.

Proponents of Proposition 33 argue that allowing consumers to shop around with a “continuous coverage discount” would drive insurance rates down.

While an insurance company is not obligated to give discounts, McHale believes that many companies will offer them.

There are going to be plenty of insurance companies who will make it available because it allows them to market a better deal to drivers, said McHale.

“Insurance companies could charge people more,” he said. “But why would they do that? They’re trying to sell insurance.”

Consumer Watchdog has propagated outlandish nightmare scenarios about Proposition 33, said McHale.

“There is a law in California that an insurance company cannot create excessive rates,” he said. “The idea that there are going to be these huge surcharges is just not true.”


A new rating, a new discount

Currently, there are more than a dozen rating factors that insurance companies can consider when setting rates. The three most important factors are: a driver’s safety record, the number of miles driven per year and the number of years driving. A driver’s insurance history is not currently a factor.   

“This is really just one insurance executive trying to create an illegal rating factor,” Court said about Proposition 33, which is predominantly funded by George Joseph, the billionaire chairman of Mercury Insurance. “There’s no getting around the fact that some people will pay a lot more.”

The big lie is that soldiers get to keep discounts they now lose, said Court. “Today, they can get a loyalty discount that is related to their existing insurance company,” he said. “That’s different than charging people based on a new rating factor that they would create with this proposition.”

A similar initiative, Proposition 17, was defeated by California voters in 2010.


For more information on the “Yes” campaign, visit: For more information on the “No” campaign, visit:


What’s in Proposition 33:

• Allows auto insurance companies to set prices based on a driver’s previous insurance coverage, with any company;

• Allows auto insurance companies to give proportional discounts to drivers who had some coverage in the most recent five years;

• Allows auto insurance companies to raise rates on drivers who have not had continuous coverage; and

• Exempts active-duty military, people who have been unemployed for less than 18 months and those who have been uninsured for less than 90 days from a lapse in coverage.

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