Big Insurers’ TV Ads Air After Garamendi Refused Blackmail Effort
Santa Monica, CA — Five of the nation’s largest auto insurers began airing an expensive TV advertising campaign today in order to mislead Californians, mostly in rural parts of the state, about the effects of Insurance Commissioner John Garaamendi’s proposed Good Driver pricing reforms. Garamendi’s reforms, which are mandated by the 1988 voter initiative Proposition 103, require auto insurers to base drivers’ premiums primarily on driving record rather than other factors such as ZIP Code or marital status.
The industry sent an explicit message to Garamendi last month, saying it would unleash the campaign just as Garamendi was running for the office of Lieutenant Governor unless he retreated from the reforms. Garamendi refused, and reported the extortion attempt in letters sent last week to the United States Attorney and FBI. Now, carrying out the threat, the industry is spending an estimated $2.4 million to mislead Californians into believing that the Good Driver reforms would hurt them, when, in fact, the new rules will benefit good drivers and low-mileage drivers in every corner of the state, according to the non-profit, nonpartisan Foundation for Taxpayer and Consumer Rights (FTCR).
“The insurance industry will use any means necessary, from TV ads to extortion, to stop pricing reforms for good drivers, and this campaign should be seen for what it is: a big lie meant to mislead Californians about the impact of Garamendi’s reforms,” said consumer advocate Douglas Heller, Executive Director of FTCR. “Anyone who sees these ads or receives the mailer should ask themselves why they should trust the insurers’ attack ad when their goal is to protect themselves, not you.”
Over the past two years auto insurers have enjoyed record profits in California (reaping over $4 billion in profits from California auto insurance policies over the past two years) and are desperate to keep the status quo, which has allowed them to increase profits by charging good drivers throughout the state unfairly high premiums simply because of the ZIP Code in which they live. The new Garamendi rules will still allow insurers to consider geography in setting premiums, but will require factors related to a motorist’s driving record to be most important.
Insurance Company Statistics Lie
The premise of the insurance industry’s ad campaign is that Good Driver reforms will lead to higher rates for rural drivers. The campaign cites statistics that are misleading in order to create unfounded fear of price increases among — good drivers and low-mileage drivers. For example, the statistics that the attack ads cite reflect aggregate data that include likely and appropriate rate hikes on bad drivers, such as those with DUIs, and long-haul drivers, who should pay more than neighbors who put fewer miles on their car every year, consumer advocates said. Even State Farm, one of the primary funders of this ad campaign, admitted that “There is… no study from which the impact on California policyholders can be assessed,” in a formal filing with the California Department of Insurance earlier this year.
Proposition 103, the 1988 initiative that mandated these Good Driver reforms, overcame an $80 million industry campaign of similar lies, but this portion of the initiative has never been implemented because of insurance industry-driven delays.
“Don’t believe the insurance industry hype. These ads are not to be trusted and drivers should call their insurers to demand a stop to the spending of their premium dollars on this deceptive scare campaign,” said Heller.
Over the past three years, Commissioner Garamendi has heard testimony from drivers throughout the state, as well as economists, actuaries and other experts, who have illustrated how the current system, installed by disgraced former Commissioner Chuck Quackenbush, hurts good drivers. Under the current rules that Garamendi proposes to change, forces drivers to pay as much as $500 more for basic auto insurance than a neighbor across the street in a different ZIP code.