CAPITOL REPORT – Bill splits lawmakers, regulators

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Orange County Register (California)

The Legislature’s 2002 finale featured a pitched battle over an issue known as ”the persistency factor.” If it sounds boring, it isn’t.

It means that automobile insurers can give discounts to long-term ”persistent” customers, and then get back the difference through surcharges on other customers with spotty coverage histories.

About 22 million people drive cars in California, and at any given time, perhaps 4 million don’t have insurance. By consumers’ estimates, Senate Bill 689 by Sen. Don Perata, D-Oakland, would have added at least $200 a year to the cost of a policy for anyone with gaps in their coverage.

Perata’s bill was sponsored by Mercury Insurance, a major automobile insurer and perennial Capitol power player, and it zipped through the Legislature.

More than a few eyebrows were raised when it was learned that Perata’s campaign donations included $25,000 from Mercury last June, plus another $10,000 in September, two weeks after the bill passed the Assembly 62-11 and the Senate 30-0.

Local lawmakers also got Mercury donations in 2002, including Sens. Ross Johnson, R-Irvine, ($3,000) and Bill Morrow, R-Oceanside, ($2,000), and Assembly members Rudy Bermudez, D-Norwalk, ($2,000); Tom Harman, R-Huntington Beach, ($1,000); John Campbell, R-Irvine, ($1,750); Ken Maddox, R-Costa Mesa, ($1,000); and Lynn Daucher, R-Brea, ($1,000).

Of the Orange County legislative delegation, all but Sen. Joe Dunn, D-Santa Ana, favored the bill, according to legislative records.

But Gov. Gray Davis — who got $25,000 from Mercury — vetoed it hours before a constitutional deadline, saying the insurance commissioner asked him to.

That seemed to be the end of it — until now.

In February, Perata introduced SB841, an obscure bill that dealt with holding companies.

But on April 23, it was gutted and rewritten to resemble SB689. A new wrinkle: Members of the military who were away on duty would be exempt from surcharges.

Backers of Perata’s bill believe loyal customers should get a break and that offering discounts fosters competition and lower rates for all good drivers.

But others, including regulators, are skeptical, and a consumer group is leading the charge against the new bill.

”Insurance is a zero-sum game. If you give somebody a discount, you have to give somebody else a surcharge,” said Doug Heller of the Foundation for Taxpayer and Consumer Rights.

New Insurance Commissioner John Garamendi plans to testify before the Senate Insurance Committee on Perata’s bill when it comes up for it’s first major policy hearing on Wednesday. Among those on the panel are Morrow and Johnson.

Garamendi is expected to oppose it.

Davis, ever cautious, has not taken a position.


Contact the author at (916) 449-6687 or [email protected]

Consumer Watchdog
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