Insurance Industry Gives 56% of Dollars Against Campaign Finance Overhaul Prop 89;

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Insurance Reform Prop 103 Author Comments

Santa Monica, CA — The multi-billion dollar insurance industry is the primary source of funds against Proposition 89, the the initiative that will stop political corruption, a sign that “insurers fear losing the political dominance that comes from spending millions to buy politicians and corrupt the initiative process,” according to consumer advocate Harvey Rosenfield, author of insurance reform Proposition 103.

Insurers have spent $25 million on lobbyists, campaign contributions and gifts to lawmakers since 2003. The industry gave 56% — $601,015 — of the $1 million donated to the No on Prop 89 PAC to-date.

Rosenfield notes that insurers were finally forced this year to implement a key provision of Proposition 103 that requires insurers to base premiums primarily upon driving safety record rather than zip code. Insurance companies quietly threatened the Insurance Commissioner with a $2.4 million attack campaign if he proceeded to enforce the law. When he refused to bow to the industry’s demand, insurers made good on their threat.

Proposition 89 would limit contributions to single independent expenditure committees to $1,000, and would limit independent expenditures by any one source to $7,500 per year. A state legislative committee convened a hearing today to examine such expenditures, one of the largest sources of political spending in California.

The industry has spent millions to successfully thwart reform of insurance premiums and claims practices in the legislature, in large part thanks to the millions they doled out to lawmakers.

“Insurers are leading the campaign against Prop 89 because they fear losing their ability to buy the Insurance Commissioner and the California Legislature, where they have long been able to stop reform of their claims and pricing practices,” said Rosenfield. “Prop 89 stops the political corruption that currently blocks so many needed reforms from gaining support in Sacramento, and would put an end to the extortionist tactics used by the insurance industry to try to blackmail elected officials like the Insurance Commissioner into abandoning consumers.”

Millions of dollars of insurance company donations to politicians have accompanied 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. His committee has blocked desperately needed homeowner protections in the wake of Southern California wildfires, approved legislation allowing auto insurance surcharges on low-income drivers, and passed a measure that would have blocked landmark rules lowering rates for good drivers throughout the state.

Former Insurance Commissioner Chuck Quackenbush was elected by the insurance industry and proceeded to do the industry’s bidding until he was forced to resign for accepting industry money in lieu of penalties for violations of state law. The money went to a slush fund he controlled.

“Insurers know that their political donations buy them extraordinary power to crush consumer protection bills. Prop 89 would relieve lawmakers of their dependence on industry cash and that scares insurance executives,” said Carmen Balber, consumer advocate with the Foundation for Taxpayer and Consumer Rights.

Insurance industry money to the No On 89 PAC was contributed by: Mercury Insurance, California’s 3rd largest auto insurer, and its CEO George Joseph; State Farm Insurance, California’s largest auto insurer; Zenith, the largest private workers compensation insurer in the state; Farmers Insurance, the state’s 2nd largest auto and homeowners insurance company; IBA (Insurance Brokers and Agents) West; The Doctors Company, 21st Century, and Fireman’s Fund.

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.

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.

Insurance Industry Campaign Contributions Thwart Consumer Protections
Further examples of how the insurance industry benefits financially from its huge campaign contributions include:

– Gov. Arnold Schwarzenegger received $105,000 from the American Insurance Association the day he vetoed 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. Schwarzenegger has taken $2.9 million from the industry since 2003.

Mercury Insurance won the passage of an illegal surcharge on motorists who had been previously uninsured. Mercury Insurance distributed more than $1 million to state lawmakers in the two years leading up to enactment of the bill; Governor Gray Davis received $175,000 from Mercury after signing the bill.

Mercury‘s CEO George Joseph gave $500,000 to the GOP after the majority Democrats blocked a bill that would have amended Proposition 103 to allow insurers to charge drivers more based on where they live.

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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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