Mercury’s Self-Serving Insurance Initiative

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It’s never hard to find self-serving propositions on the California
ballot. But even in a time that sees Pacific Gas & Electric Co.
sponsoring a measure to force cities to get a two-thirds popular vote
before they can set up or expand a public electric utility, a measure
sponsored by Mercury Insurance takes this year’s prize for sheer gall.

Mercury, of course, maintains it did most California drivers a big
favor by spending more than $1 million to qualify its initiative for the
June ballot, where it will appear as Proposition 17.

“Our measure rewards responsible drivers,” initiative spokeswoman
Kathy Fairbanks insists. The definition of a responsible driver? Anyone
who maintains constant car insurance coverage for years, never letting
it lapse. By this definition, a college student on a campus where cars
are impractical is irresponsible when he or she lets a policy lapse.
Soldiers deployed to Iraq or Afghanistan or Bosnia for a year or two are
also irresponsible for not continuing to pay premiums on car insurance
policies that do them no good.

These are just two categories of drivers who would have to pay
extra-high premiums under Mercury’s measure, which claims to offer
discounts for drivers who maintain constant coverage year after year.

That would include about 82 percent of California’s drivers. It’s
difficult to understand how any price that’s applied to more than four
out of five affected customers can be called a discount. A price that’s
so commonly applied is actually a regular price. And, in fact, that’s
how the 1988 Proposition 103 insurance rate rollback initiative treats

Meanwhile, those who let their insurance lapse — no matter how
sensible or responsible the reason — will pay through the nose if this
measure passes.

Lawyer Harvey Rosenfield, who wrote Proposition 103 and founded the
Consumer Watchdog advocacy group, has videotaped a test case where he
filled out insurance applications via computer, pretending to be a
Nevada resident applying for Mercury coverage under that state’s laws,
which allow a penalty for letting insurance lapse.

Listing qualifications identical in every way except that one
“applicant” had allowed his insurance policy to expire, Rosenfield found
the rate 73 percent higher.

“Comparing California to Nevada is like comparing apples to oranges,”
responded Fairbanks, without indicating how it’s different to apply
for insurance in Nevada and California. One difference, of course, is
that companies operating in California now must base their prices
mostly on a driver’s record, not on how often or how long that driver
has had insurance.

Rosenfield calls the Mercury proposal a “swindle” that could cost
motorists buying new policies hundreds of dollars a year more than the
same coverage costs someone who has kept his or her policy going

Mercury claims its measure will benefit many thousands of motorists
because today’s no-lapse “discount” applies only if drivers stay with
the same company. Drivers who do that often qualify for other, actual
discounts, so most stay put once they make a choice. Proposition 17
would let the same rates apply when drivers switch companies. Plainly,
Mercury plans an aggressive campaign to woo other companies’ customers
if its initiative passes.

Proposition 17, thus, stands in the tradition of deceptive measures
put forward from time to time by companies and industries trying to
feather their own nests.

Another was a tobacco industry push for an end to local smoking
regulations. Just two years ago, Texas energy executive T. Boone Pickens
— chief funder of the scurrilous Swift Boat ads that many believe
killed the 2004 presidential candidacy of multiple military medal winner
John Kerry — spent more than $5 million pushing a measure that called
for California to issue $5 billion of bonds that would have been spent
primarily for cars running on compressed natural gas, a commodity
produced in large quantities by a Pickens company.

Voters usually see through these kinds of self-serving measures, but
not always.

The question this time is whether voters will recognize that
Mercury’s measure will cost them hundreds of dollars any time their car
insurance lapses, whether intentional or not. One thing for sure:
Mercury will continue to outspend its opponents by plenty, viewing every
nickel it puts into the campaign as an investment.

E-mail [email protected]. For more
columns, visit

Consumer Watchdog
Consumer Watchdog
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