Los Angeles Times

Ending the threat of a divisive campaign, a billionaire insurance executive said Friday that he would abandon plans to qualify ballot initiatives to overhaul the way auto insurance rates are set.

George Joseph, chairman and chief executive of Los Angeles-based Mercury General Corp., said he told his political consultants to withdraw all four versions of his initiative proposal for the Nov. 7 ballot, citing “a lack of industry consensus.”

The surprise decision will remove a major obstacle to Insurance Commissioner John Garamendi‘s regulatory effort to diminish the use of ZIP Codes in setting rates, a practice some consumer advocates say results in higher premiums for poor and minority group members.

Without an industry initiative, consumer advocate Harvey Rosenfield said he would also drop his countermeasure, nicknamed “Son of Proposition 103,” after the 1988 auto insurance ballot initiative. The counter-initiative would have tightened regulations on firms selling auto and homeowner insurance.

Joseph said he grew frustrated as insurance industry executives quarreled over whether to support his measure.

“Some companies and trade groups are for it, some are against it and some haven’t made up their minds,” Joseph said in an interview. “I’m getting tired of waiting. We’ve had six months of discussion, and sooner or later you have to say, ‘That’s it.’ ”

Joseph’s original proposal would have thwarted Garamendi’s effort to require that rates be based on three primary factors: driving records, annual miles driven and number of years licensed. It would also have restored discounts for drivers with continuous insurance coverage, even through different carriers.

At least four versions of the measure were drafted. The latest version, which Joseph’s team submitted to state officials this week, focused solely on the continuous coverage discounts.

Rosenfield said the threat of his counter-initiative probably caused insurance companies to walk away from a costly ballot battle this fall.

In 1988, the warring factions spent $80 million.

“I think they realized that nobody’s interests would be served,” said Rosenfield, who wrote Proposition 103 and leads the Santa Monica-based Foundation for Taxpayer and Consumer Rights. “We took their four initiatives very seriously, and I think they took ours very seriously.”

Joseph declined to say how much he and Mercury might have spent on the campaign, but he had the wherewithal for an expensive fight: Forbes estimates his fortune at $1.2 billion.

Garamendi said removing the threat of an insurance initiative war “allows us to move forward to create a fair and appropriate pricing of auto insurance, consistent with the 1988 law.”

The initiative battle also had the potential for dividing the state along geographic and racial lines.

Insurance executives say that urban areas have higher rates of accidents and thefts than suburban and rural areas, and that premiums should be priced accordingly.

Critics say that this system unfairly punishes good drivers who happen to live in congested areas and that it hits the poor and minorities especially hard.

Lobbyists for insurance trade groups in Sacramento, which had not taken a position on Joseph’s initiative proposals, said they were surprised but not displeased that the Mercury executive had changed his mind.

“This will allow the industry to devote its resources to some critical issues, including getting the governor reelected and protecting the workers’ compensation reforms,” said Ken Gibson of the American Insurance Assn.