One year after vetoing a similar measure, Gov. Gray Davis has signed legislation designed to lower car-insurance prices for longtime holders of policies.
Supporters say that SB 841, signed into law Saturday, will spur competition by allowing insurance companies to offer discounts based on the number of years a driver has been insured by a competitor.
But opponents cried foul Monday, accusing Davis of a political payoff and saying that any savings from SB 841 would come at the expense of young, immigrant or low-income Californians.
“Governor Davis has sold out California voters on behalf of Mercury Insurance and other insurance companies that have been among his biggest donors,” said Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights. “This bill symbolizes the pervasive corruption of California’s democracy.”
Rosenfield vowed to file suit challenging the new bill as a violation of Proposition 103, the landmark 1988 auto-insurance reform bill that he wrote. Absent court intervention, SB 841 takes effect immediately as an urgency measure.
Mercury Insurance sponsored SB 841, and analysts say it could help the company capture a greater share of the California market. Mercury has contributed $1.2 million to lawmakers since 2001, including $25,000 to Davis and $35,000 to the bill’s author, Sen. Don Perata, D-Alameda.
Steve Maviglio, a Davis spokesman, bristled at accusations of cash-register politics and said the governor signed SB 841 only after state attorneys opined that Proposition 103 does not bar the new measure.
“The fact is, contributions don’t play any part in the governor’s decision on a bill,” Maviglio said. “This (bill) is going to benefit 85 percent of the motorists in this state, and when a bill does that, chances are it’s good policy.”
The legal dispute centers on provisions of Proposition 103 that say lack of auto insurance “in and of itself” shall not be a factor in determining auto policy discounts.
But state attorneys contend SB 841 would be a permissible amendment because it furthers the initiative’s purpose of encouraging a competitive marketplace.
Insurance companies currently can reward their own customers with “loyalty” discounts for holding policies for many years. SB 841 allows them to offer similar price breaks to competitors’ customers, a practice that was routine in years past, supporters said.
Drivers who dutifully comply with state law and have held policies for many years deserve to shop around for the best discount, supporters contend.
But SB 841 will backfire, critics say, by raising rates for drivers who haven’t been longtime policyholders and can’t easily afford car insurance – including teenagers, low-income residents and new immigrants.
Faced with paying perhaps hundreds of dollars more for policies, they simply may violate state law and drive uninsured, critics claim.
“For the rest of us, (SB 841) may mean more people on the road who can’t afford insurance and therefore don’t have it – and that’s bad for everyone,” said Gail Hillebrand, a senior attorney for Consumers Union.
The bill gives military personnel a two-year grace period and provides an exception for drivers whose coverage has lapsed for no more than 90 days over a five-year period.
Davis said in his signing statement that Perata has agreed to propose follow-up legislation that would study SB 841’s effects on low-income and other drivers over a five-year period and would set a termination date for the bill, should the study show undue impact.
The Bee’s Jim Sanders can be reached at (916) 326-5538 or [email protected]