Federal and state lawmakers called Monday for a closer examination of Mercury Insurance Group in the wake of a state report that suggests the firm may have engaged in illegal practices, including deceptive pricing and discrimination against military personnel and people in other occupations.

The document from the office of State Insurance Commissioner Steve Poizner, reported on by The Chronicle Monday after the newspaper obtained it through the state Public Records Act, said the company may have repeatedly violated Proposition 103, the landmark consumer protection law passed by voters in 1988.

According to the state report, Mercury did not immediately grant coverage to applicants including artists, emergency vehicle operators and military personnel.

“I am concerned that some California insurers may have discriminated against soldiers and veterans by charging them higher premiums,” U.S. Rep. Loretta Sanchez, D-Garden Grove Orange County, a member of the House Armed Services Committee, said Monday.

“We should be celebrating the service of our men and women in uniform, not penalizing it.”

Sanchez vowed to “ensure that the appropriate state and federal authorities take action to guarantee that our soldiers and veterans are protected against this type of abuse.”

At the same time, two Democratic Assemblymen who are running for insurance commissioner said they intend to closely examine the state’s findings and determine what needs to be done.

Assemblyman Dave Jones, D-Sacramento, called the 275-page state report “very disturbing.”

“It would appear that in many cases, consumers were being taken advantage of,” Jones said, adding that he is concerned that the firm may have engaged in “bait and switch” pricing and discrimination “against people in a particular industry – such as artists, actors, dancers.”

Jones said he would review the report and talk to other lawmakers about “the possibility of oversight on this issue.”

Assemblyman Hector De La Torre, D-South Gate Los Angeles County, said, “There seems to be a pattern and practice of these behaviors by Mercury – so the million-dollar question is … what is the Department of Insurance doing to control this? It’s not at all clear what they did to remedy the situation.”

In a statement Monday, Mercury officials dismissed the report, the state’s most recent completed investigation of the firm from 1998 to 2004, saying consumer groups were trying to “mislead consumers and rehash old allegations.”

“Many of these allegations were dropped from the final report because they were found to be without merit,” the company said. Its agents and employees are “committed to providing our customers with the best insurance value possible and unsurpassed service and care.”

Consumer Watchdog, a leading advocacy group, Monday called on Navy Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, to investigate whether Mercury may be discriminating against military personnel by supporting Proposition 17 on the June ballot.

The measure, known as the “Continuous Coverage Discount Initiative,” would affect millions of consumers with automobile insurance.

Harvey Rosenfield, the founder of Consumer Watchdog and author of Prop. 103, told reporters that the state examination is an indictment of the firm.

He said he asked Mullen to examine whether Prop. 17 would allow Mercury to charge higher rates to U.S. military members who do not maintain continuous car insurance coverage while serving their country at home – say, at boot camp – a practice that is illegal under Prop. 103.

Kathy Fairbanks, who represents Californians for Fair Auto Insurance Rates, which supports Prop. 17 with $3.5 million in backing from Mercury, said the initiative is supported by military groups including the American GI Forum and the Republican Veterans Association because it would lower costs for military personnel and other state consumers.

Poizner, a Republican candidate for governor, continues to investigate Mercury, the parent firm to the state’s third-largest auto insurance firm, which serves 10 percent of the state market.

His office is involved in an administrative action against Mercury for alleged noncompliance on an issue dating back to 1998 that surfaced in the state report.

Since 2006, the state has fined Mercury $600,000 for violations based on its own examinations and on consumer complaints about the firm.

State officials told The Chronicle that they uncovered 25 different issues of concern in the company’s practices in their studies that date back to 1998 – seven of which remain unresolved.