The Times’ editorial board came out in opposition
to Proposition 17, a measure on the June
ballot that would enable a new “continuity” discount for drivers
who switch insurance companies. It’s a variation on the current loyalty
discounts that insurers can offer to encourage drivers to renew their
policies. The primary backer of Proposition 17, Mercury Insurance,
argues that the loyalty discounts deter competition by discouraging
people from changing insurers, and that adding a continuity discount
would remedy that problem. The editorial counters that Proposition 17 is
based on flawed logic and runs counter to the spirit of Proposition 103
— a 1988 initiative that tied auto insurance rates more closely to a
driver’s record.

The editorial states that Proposition 17 would allow insurers “to
offer lower premiums to drivers who maintained insurance for at least
five years with any company.” But a spokeswoman for the Mercury-funded
group Californians for Fair Auto Insurance Rates, which is running the
campaign in favor of the ballot measure, disputed that, saying insurers
would be able to offer the continuity discount to drivers who’d
maintained insurance for a significantly shorter period of time — as
short as six months, in fact.

The measure wouldn’t affect loyalty discounts, which companies
usually offer to drivers who’ve been customers for much less than five
years. But Proposition 17’s language on the continuity discount isn’t
clear as to when it would kick in. Here are the relevant portions of the
text:

[A]n insurer may offer applicants or insureds an additional
discount … based on the length of time the applicant or insured has been
continuously insured for bodily injury liability coverage … with one or
more insurers, affiliated or not.The insurer may consider the years of
continuous coverage preceding the policy effective or renewal date. This
discount is called a continuity discount. Children residing with a
parent may be provided the same discount based on their parents’
eligibility for a continuity discount….

Continuity of coverage shall be deemed to exist even if there is a
lapse of coverage due to an applicant’s or insured’s absence from the
United States while in military service, or if an applicant’s or
insured’s coverage has lapsed for up to 90 days in the last five years
for any reason other than nonpayment of premium. This subdivision does
not limit an insurer’s ability to offer additional grace periods for
lapses.

Consumer Watchdog’s
Harvey Rosenfield, a leading opponent of Proposition 17 (not
surprisingly, given that he wrote Proposition 103), said the only
logical interpretation of the “deemed to exist” clause is that a driver
must have five years of nearly uninterrupted coverage before becoming
eligible for the continuity discount. But what about new drivers who’ve
spent four years or less behind the wheel? You wouldn’t say their
coverage “lapsed” before they started driving, would you? On the other
hand, if insurers provide a grace period for them, shouldn’t they also
offer the new discount to anyone who resumes driving after an extended
period spent relying on mass transit? Wouldn’t they pose a lower risk
than a new driver? And why should inexperienced young drivers qualify
for the discount simply because they’re living with a parent who does?

Clearly, the eligibility issue isn’t as clear-cut as the editorial
suggested, but it doesn’t seem as simple as proponents claim either.
That’s not necessarily a reason to vote against Proposition 17, but it
does raise questions about who would benefit from it. It also clouds the
issue of who stands to pay more if the proposition becomes law. Just as
with all current discounts, insurers would have to offset the projected
revenue loss from the continuity discount with a new surcharge on
customers who don’t qualify for it.