Despite Prop. 17’s Defeat, Auto Insurers’ Battle May Not Be Over

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A $16-million effort by auto insurers to ease regulations may not be
over despite state voters’ decision to reject Proposition 17, which
would have allowed drivers to take their continuous-coverage discount
with them if they switched carriers.

By the time all votes were counted early Wednesday, voters defeated
the initiative 52% to 48%, despite lopsided campaign funding that
allowed insurance industry supporters to outspend opponents 12 to 1.

The hard-fought battle was waged between consumer advocates, who said
the measure would increase premiums, and insurers, led by Mercury
Group, which contended in an advertising blitz that the proposition
would cut rates.

Consumer Watchdog of Santa Monica hailed the measure’s defeat as a
sign that voters are wary of letting big business intrude into the
citizen initiative process that allowed the proponents to get the issue
on the ballot.

But spokesmen for Californians for Fair Auto Insurance Rates, the Yes
on 17 campaign, said they were disappointed and signaled that they
might carry on the fight for regulation revisions they expect to bring
more business their way.

Mercury Chairman George Joseph, who for years has been struggling to
get the changes through the Legislature and survive court challenges,
says he’s not sure what his next step might be.

“We have to convince people … that this is a good thing for
consumers. I don’t think we made this clear enough,” Joseph said,
repeating the campaign’s message that more than 80% of insured
motorists would benefit from being allowed to take their loyalty
discounts with them to a new insurer.

Mercury provided the vast majority of the Yes on 17 funding, used to
bombard drivers with the message that passage would correct “a flaw in
the law” and spur more competition among insurers.

Proponents failed in their attempt “to scam California drivers by
authorizing surcharges that voters made illegal in 1988 when they passed
Proposition 103,” said Harvey Rosenfield, founder of Consumer Watchdog
and author of the ballot measure that has regulated car insurance
rates for 22 years.

“This is a victory not just for motorists in California, but a
broader victory for California voters, who have made it clear they
don’t intend to let insurance companies or utility companies or other
big corporations subvert the people’s initiative process,” Rosenfield

The Campaign for Consumer Rights spent about $1.3 million to urge
voters to reject the Mercury-backed measure.

The campaign warned voters that passage would eventually raise rates
for new drivers, military personnel serving out of state and anyone who
quit driving for a while to save money or take public transpiration.

Opponents also contended the threat of higher rates for those already
paying top dollar for car insurance could lead to more uninsured
drivers on the state’s roads.

Coupled with defeat of Proposition 16, a measure backed by Pacific
Gas & Electric Co., which would have required voter approval before
cities could get into the electricity business, voters sent a strong
message that their voice in the political process cannot be bought,
Rosenfield said.

The insurance industry backers stood their ground despite Proposition
17’s failure.

“Voters missed an opportunity to extend an auto insurance discount
that could have lowered auto insurance rates for millions of drivers,”
said Mike D’Arelli, executive director of the Alliance of Insurance
Agents & Brokers that backed the initiative.

“There is no doubt that extending the continuous coverage discount
would have improved current auto law for consumers,” he said.

Kathy Fairbanks of the Yes on 17 campaign described its defeat as “a
Pyrrhic victory” for opponents because they are being investigated by
the Fair Political Practices Commission for what she said was an attempt
to hide the source of $590,000 in contributions to the StopProp17

Rosenfield dismissed the failed sponsors’ report of campaign finance
irregularities as sour grapes and said his campaign would welcome the
commission’s review because they have scrupulously complied with
campaign laws.

[email protected]

Marc Lifsher in Sacramento contributed to this report.

Consumer Watchdog
Consumer Watchdog
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