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When you purchase auto insurance, you are protected against being charged any penalty or extra premium for not already having an insurance policy. Under Proposition 103, your auto insurance company cannot surcharge you or charge you a different rate just because you weren’t insured before, or had a lapse in coverage.

California has an uninsured motorist problem. Many motorists do not purchase insurance coverage because they cannot afford to. As a result, those who obey the law and buy insurance sometimes end up paying for extra insurance coverage, known as “uninsured motorist coverage,” to protect themselves if they are hit by someone who has no insurance coverage.

By prohibiting unfair practices and excessive rates, Proposition 103 sought to make insurance more available and affordable — so that there would be fewer uninsured motorists on the road.

To make sure that those without insurance were not discouraged from buying insurance, 103 prohibited companies from surcharging applicants just because they were not previously insured or had had a lapse in coverage.

Text of Proposition 103 as enacted by the voters:


(c) The absence of prior automobile insurance coverage, in and of itself, shall not be a criterion for determining eligibility for a Good Driver Discount policy, or generally for automobile rates, premiums, or the group plan.

Amendments (changes from voter approved law in bold):

No changes to the original text of this provision have been enacted.

Status of Provision:

CONSUMER ALERT: Many insurers are violating this provision of Proposition 103.

Some have attempted to do so in an indirect and devious manner, by requiring that applicants for insurance show proof of prior insurance as evidence that they have a good driving record (insurers call this “accident verification”). Others simply ignore the law. Former Insurance Commissioner Quackenbush condoned these lawbreakers. (Read more about the Quackenbush Scandal here.)

FTCR has sued several insurance companies (the S. California Auto Club, Safeco, and GEICO) for violating this law (see below). Acting in response to an FTCR petition, the California Department of Insurance initiated investigations into the violations and has issued rulings ordering insurers to cease their violations of the law (see below).

In 2002, Mercury Insurance Company, one of the insurers which has systematically violated the law, tried to get the law itself changed so that it could not be held responsible for its lawbreaking. Proposition 103 forbids such hostile amendments. (See the section on the Legislature and Prop. 103). However, after Mercury showered the Legislature with campaign contributions, lawmakers enacted the legislation. California Gov. Gray Davis, citing Proposition 103, vetoed the bill.

Source Documents:

FTCR files lawsuits against the Southern California Auto Club, Safeco and GEICO for violating this provision of Proposition 103. Read the 1/14/02 news release.

Relevant Legal Materials:

Petition by FTCR requesting the California Insurance Commissioner to write regulations preventing insurers from violating this provision of 103. Read the petition (5/4/01).

Read the Testimony of FTCR attorney Pamela Pressley, February 28, 2002, before CDI, concerning violations of “no prior” law and proposed regulations governing “persistency” discounts.

Read the Testimony of FTCR attorney Pamela Pressley, March 7, 2002, before CDI, concerning violations of “no prior” law and proposed regulations governing “accident verification.”

Read the regulation proposed December 21, 2001 by the California Department of Insurance in response to FTCR petition, prohibiting “no prior insurance” surcharges. This regulation became effective on Sept. 26, 2002.

Read the regulation proposed on December 21, 2001 by the California Department of Insurance in response to FTCR petition, to prohibit insurers from using evidence of prior insurance coverage for Good Driver “accident verification” purposes. This regulation became effective November 30, 2002.

Read FTCR’s objections, filed May 8, 2001, to a settlement of a class action lawsuit in which the insurance company would be allowed to continue to violate the law.


FTCR factsheets concerning Mercury Insurance Company’s 2002 attack on the law:

Aug. 8, 2002 – George Joseph (Mercury Insurance): How One Rich Insurance CEO Uses His Money to Escape the Law, Undermine Democracy, And Benefit Himself.

Aug. 29, 2002 – SB 689 — A Double Surcharge On Poor Drivers.

Aug. 7, 2002 – AB 1488 — the “Portable Persistency Discount” — Violates State Law.

Aug. 6, 2002 – FTCR Opposes Mercury Insurance Proposal — Letter to Legislature.

Sep. 14, 2002 – Insurers Continue to Charge Previously Uninsured Motorists More In Violation of Proposition 103.

FTCR news releases concerning Mercury Insurance Company’s 2002 attack on the law:

Sep 30, 2002 – FTCR Praises Veto of Mercury Insurance Surcharge Bill. Governor Davis Derails Mercury Money Train, Protecting Motorists & Military.

Sep 24, 2002 – Mercury Insurance Bill Would Make Auto Coverage Too Costly for Newly Licensed Immigrants. With Driver’s License Bills On Governor’s Desk, Insurance Proposal to Surcharge Previously Uninsured “Makes No Sense”.

Sep 20, 2002 – Mercury’s Thank-You Gifts Begin to Arrive. Insurance Company has Begun Providing Campaign Cash to Lawmakers Who Voted for its Scheme to Surcharge Poor Motorists, Soldiers.

Sep 19, 2002 –
Army Major Tells Davis: Don’t Surcharge Our Soldiers. Bill to Raise Auto Premiums for Returning Soldiers, Others With Coverage Lapses on Davis’s Desk.

Sep 18, 2002 –
FTCR to Davis: Return $25K Sept. 12 Check from Mercury Insurance. Bill to Raise Auto Premiums for Returning Soldiers, Others With Lapses in Coverage on Davis’s Desk.

Aug 31, 2002 –
The Fix Is In : Dems Side With Insurer Over Poor. Surcharge On Those With Lapsed Coverage Violates Prop 103.

Aug 29, 2002 –
Two Thirds of Assembly Members Vote To Let Mercury Surcharge Uninsured. Group Calls Upon Burton To Put Poor Above Party’s Cash Machine.

Aug 26, 2002 –
Senator Don Perata Authors Eleventh Hour Bill To Surcharge Uninsured Motorists. Sponsor Mercury Insurance Gave Perata $25,000 Days Before Hearing on Similar Bill.

Aug 26, 2002 –
Eleventh Hour Bill To Surcharge Uninsured Motorists Passes Assembly Committee. Sponsor Mercury Insurance Gave Legislators $1,077,550 Since 2000.

Aug 26, 2002 –
Portrait of a Sacramento Lube Job. Mercury Insurance Greases the Wheels for Anti-Consumer Bill.

Aug 23, 2002 –
Democrats Resurrect Bill to Punish the Poor. Last-Minute “Gut & Amend” Bill Creates Surcharge On Previously Uninsured Drivers, Enshrines Quackenbush Rules.

Aug 07, 2002 –
Insurance CEO Attempts to Undermine Cal. Insurance Commissioner, Rip Off Consumers. So-Called “Discount” in Legislation Creates Surcharge on Poor and Will Keep All Drivers’ Premiums High.

Apr 18, 2001 –
Mercury Insurance Proposal to Create “No Claims” Insurance. AB 1488 Would Punish Accident Victims for Filing Legitimate Claims.

– For a narrative description of how Proposition 103 works, review An Analysis of California Proposition 103.

Updated January 31, 2003

Consumer Watchdog
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