Insurance Industry Accounts for 59% of Anti-89 Money;

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$400,000+ From Insurers That Have Mastered Pay-to-Play in Capitol; Prop 89 Will Stop Political Corruption, End Special Interest Dominance

Santa Monica, CA — California’s multi-billion dollar insurance industry, among the most prolific political donors in the state, has become the lead financier of the campaign against Proposition 89, the campaign reform initiative that will stop political corruption. $415,000 of the $700,000 donated to the No on 89 PAC to date comes directly from the insurance industry, including:

* $200,000 from California’s 3rd largest auto insurer, Mercury Insurance, and its CEO George Joseph;
* $100,000 from Zenith, the largest private workers compensation insurer in California; and
* $50,000 from Farmers, the state’s 2nd largest auto and homeowners insurance company.
* Other insurance contributors against Prop 89 include IBA (Insurance Brokers and Agents) West, The Doctors Company and Fireman’s Fund.

Driving insurers’ donations, according to consumer advocates, is fear of another Proposition 103-style revolt against the status quo. In 1988 voters enacted Prop 103, placing strong limits on insurance company profiteering with Prop 103. This month Insurance Commissioner John Garamendi put an end to the 17 year battle over the last unenforced provision of Prop 103 when he required auto insurers to rewrite their pricing system to base premiums on a motorists’ record rather than their ZIP code. As companies begin to comply, they are announcing, as State Farm did last week, massive savings for customers.

“With Prop 103, insurers lost the right to gouge consumers; now they may the lose their ability to buy the Legislature, where insurers have long been able to stop further reform of their claims and pricing practices,” said Harvey Rosenfield, the author of Proposition 103. “In 1988, Prop 103 gave the voters a chance to protect themselves when corrupt politicians refused to reform the insurance industry. Prop 89 stops the political corruption that currently blocks so many needed reforms from gaining traction in Sacramento.”

“We pay enormous premiums for inadequate insurance protections, we have seven million people without health coverage, soaring chronic asthma rates as Californians breathe the nation’s most polluted air, insufficient funding for our schools, and some of the highest gas and electric rates in the nation,” said Rose Ann DeMoro, executive director of the California Nurses Association, which is leading the drive to pass Prop 89. “The present system works for the insurance companies and the other big donors, it just doesn’t work for the rest of us.”

Supporters of Prop 89 said insurers are leading this campaign because they fear what would happen if lawmakers were freed from the pay-to-play politics that dominates Sacramento today. According to the Foundation for Taxpayer and Consumer Rights, millions of dollars of insurance company donations to politicians, particularly those in key committees, have driven a string of anti-consumer votes in the State Capitol in recent years.

Assembly Insurance Committee chairman Juan Vargas, for example, has received at least $315,000 in campaign contributions from insurance interests. In recent years, his committee has blocked desperately needed homeowner protections in the wake of Southern California wildfires and has passed legislation allowing auto insurance surcharges on low-income drivers. This year, the committee passed a measure, AB 2840, that would have blocked Insurance Commissioner Garamendi’s landmark rules lowering rates for good drivers throughout the state.

“For years the insurance industry has held a death-grip on the State Legislature, using the Assembly Insurance Committee as its boneyard,” said Douglas Heller, Executive Director of the Foundation for Taxpayer and Consumer Rights. “Insurers know that their political donations buy them extraordinary power right at the key bottleneck for consumer protection bills. Prop 89 would relieve lawmakers of their dependence on industry cash and that scares insurance executives.”

Insurers spent “$25 million on lobbyists, campaign contributions and perks”
An example of how the insurance industry benefits financially from its huge campaign contributions was vividly cited by the Los Angeles Times in a February 27, 2006 article.

Following disastrous Southern California wildfires, lawmakers proposed six bills that would have made it harder for insurers to cancel insurance or raise rates, reduced paperwork homeowners needed to collect claims, and required insurers to provide consumers with more information about policy choices.

These provisions, hotly challenged by the insurance industry, died in the Assembly Insurance Committee whose members, Democrats and Republicans alike, had received more than $1 million in insurance industry money just in 2003-2004. Overall, the Times reported, “insurers have spent $25 million on lobbyists, campaign contributions and perks for lawmakers” since 2003.

Schwarzenegger Received $105,000 From Insurers on Day of Veto
Gov. Arnold Schwarzenegger is another major beneficiary of insurance industry largesse, and responded with vetoes and other policies rewarding them. Among his insurance donors, Zenith has contributed over $244,000 to Schwarzenegger, Mercury just over $200,000 (see Gov. Arnold Schwarzenegger is another major beneficiary of insurance industry largesse, and responded with vetoes and other policies rewarding them. Among his insurance donors, Zenith has contributed over $244,000 to Schwarzenegger, Mercury just over $200,000 (see

Insurers were rewarded on October 7, 2005, when Schwarzenegger vetoed SB399, a bill that would have required insurance companies, not Medi-Cal, to pay medical costs for uninsured drivers who are injured in an accident caused by an insured driver, saving taxpayers $225 million a year. On the same day that Schwarzenegger vetoed SB 399, the American Insurance Association gave Schwarzenegger $105,000.

Mercury Insurance Donated Widely, Won Passage of Illegal Premium Surcharge
In 2003, California lawmakers and Governor Gray Davis signed legislation allowing insurance companies to surcharge motorists who had been previously uninsured. Consumer advocates and Insurance Commissioner John Garamendi opposed the proposal as an illegal amendment to voter approved Proposition 103 and arguing that it would raise premiums on many low income drivers. The sponsor of that law, authored by Senator Don Perata, was Mercury Insurance, which distributed more than $1 million to state lawmakers in the two years leading up to enactment of the bill. After signing the bill, Governor Gray Davis received $175,000 in contributions from Mercury. Read more at: In 2005, a California Court of Appeal struck down the law as an illegal amendment to Proposition 103.

Mercury Insurance CEO Gave $500,000 to GOP After Dems Blocked Anti-Consumer Bill
Mercury‘s CEO George Joseph has long been a major donor in California politics, with his donations being made in close proximity to policy decisions by lawmakers. Soon after then Senate Pro-Tem Bill Lockyer blocked Mercury sponsored legislation to amend Proposition 103 in order to allow insurers to base auto premiums on a driver’s ZIP code rather than their driving record, Joseph wrote a $500,000 check to the California Republican Party.

Prop 89 Would End Pay to Play Politics-As-Usual
Under Prop. 89, insurance companies, HMOs, and all other donors, including unions, individuals, and other businesses, would be limited to contributions of no more than $500 to Assembly or Senate candidates and $1,000 to candidates for statewide office. Donations to political parties for support of candidates and ballot measures are limited to $7,500 annually.

Prop. 89 also provides for public grants for candidates who reject private fundraising, bans contributions to candidates from lobbyists and government contractors, and sets tough penalties for violators, up to jail time and removal from office.

“Elections could be decided by what’s in the best interest of voters and public policy, not what’s good for the wealthiest donors,” noted DeMoro.

Zenith, Mercury, and other corporate donors would also be restricted to contributing only $10,000 of customer money from their general treasuries to ballot measures. Corporate PACs could continue to contribute as much as they wish on initiative campaigns.

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Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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