Mercury Insurance Bill Would Make Auto Coverage Too Costly for Newly Licensed Immigrants

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With Driver’s License Bills On Governor’s Desk, Insurance Proposal to Surcharge Previously Uninsured “Makes No Sense”

Santa Monica, CA –Two related bills allowing immigrants who are not yet legal residents to obtain a driver’s license are on Governor Davis’s desk, but newly licensed immigrants would face steep surcharges for being previously uninsured if a Mercury Insurance sponsored bill (SB 689 — Perata) is also signed into law, according to consumer advocates with the Foundation for Taxpayer and Consumer Rights (FTCR).

“It makes no sense to give immigrants drivers’ licenses and then surcharge them for the privilege. California’s roads will be safer as more Californians become licensed to drive, regardless of their legal status, but that safety will be undermined if newly licensed drivers cannot afford insurance,” said FTCR’s senior consumer advocate Douglas Heller. “People need both a driver’s license and auto insurance to drive legally in California, so Governor Davis should veto the Mercury Insurance bill when he signs the driver’s license bill.”

Legislation to place a surcharge on motorists who have been previously uninsured contradicts the public policy effort to make drivers’ licenses available to immigrants who cannot currently obtain licenses, according to the Foundation for Taxpayer and Consumer Rights (FTCR). Nevertheless, the bill passed both the Senate and Assembly in the waning days of the legislative session with the required two-thirds vote after a massive end-of-session lobbying effort by Mercury Insurance, which had also contributed to nearly two-thirds of the legislature. On September 12, 2002 Mercury contributed $25,000 to Governor Davis. SB 689, which allows insurers to base a driver’s insurance rates on their prior insurance status, arrived on the Governor’s desk on September 10, just two days before the contribution arrived.

Mercury Insurance has given big bucks to Governor Davis in hopes that it can add millions of dollars in extra surcharges to newly insured drivers and those who have had coverage lapses,” said Heller.

California law, approved by voters in 1988 as part of Proposition 103, bars insurance companies from using a driver’s prior insurance history in setting rates specifically to protect consumers such as newly licensed immigrants or Army reservists who drop coverage during their service. There is no actuarial basis for the surcharge and it contravenes the state’s overarching auto insurance public policy, which recognizes decreasing the number of uninsured motorists as the highest priority.

Insurance Commissioner Harry Low, in addition to consumer groups and civil rights groups, opposes SB 689. Commissioner Low has developed regulations that run counter to the proposal contained in the legislation and would, in fact, clearly ban the surcharges created in this bill. SB 689 “circumvents the Commissioner’s authority” and “would undermine the Department’s proposed regulations,” according to Commissioner Low’s September 5, 2002 letter to Governor Davis.

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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