An initiative to establish portable persistency discounts for automobile insurance on Tuesday was assigned a number by the Secretary of State, and shortly afterward the newly named Proposition 33 came under attack by Santa Monica, Calif.-based Consumer Watchdog.

Prop. 33, the 2012 Automobile Insurance Discount Act, will reward Californians for maintaining car insurance, and allow Californians to shop their loyalty discount to competing insurance companies, proponents of the measure state.

Current California law allows a loyalty discount if a customer stays with the same insurance company. Insureds cannot take that discount with them to other auto insurers.

But consumer advocates Say Prop. 33 is really about auto insurance rate hikes, and they consider portable persistency bad for uninsured motorists, even those who have been uninsured for only a short a period.

Consumer Watchdog called the proposition, which is in part funded by Mercury Insurance Chairman George Joseph, but not Mercury, as well as the American Agents Alliance, “a replay of Mercury’s unsuccessful 2010 initiative aimed at raising auto insurance premiums on millions of Californians.”

That initiative, Proposition 17, which was backed by Mercury, was narrowly defeated.

In fact, Consumer Watchdog was until recently hustling to get a competing initiative on the upcoming November ballot. The measure, which would also have required require health insurance companies to get approval before raising their rates, narrowly missed qualifying for November’s ballot by last month’s deadline. Consumer Watchdog got 109 percent of the signatures necessary to qualify on a random sample verification rather than the required 110 percent. However, elections officials’ projections of 109 percent validity make the initiative all but certain to appear on the next general election ballot after November, the Santa Monica, Calif.-based consumer group stated.

That Consumer Watch Dog initiative would have established prior approval for health insurance, would also have prohibited “unfair pricing” not only for health, but for auto and home insurance based on prior coverage and credit history.

Needless to say, the group is vehemently opposed to Prop. 33.

According to a Consumer Watchdog statement: “Prop 33 aims to change over 20 years of insurance law by repealing a key anti-discrimination provision from the 1988 voter initiative Proposition 103. In addition to broadly reforming insurance rates in California, Proposition 103 specifically prohibited an insurance industry redlining scheme first brought to public attention by the 1985 California civil rights case King v. Meese. While Prop 103 made that scheme illegal 24 years ago, Prop 33 would rollback that protection and revive this discriminatory practice by insurance companies that particularly targets low-income and other Californians struggling financially.”

Joseph, who has come under regular attack by Consumer Watchdog for his support of portable persistency, told Insurance Journal on Tuesday he believes Prop. 33 is a pro-consumer initiative.

“There is no way that anybody who understands the insurance business can dispute the fact that this initiative improves the competitive environment in California,” Joseph said.

He said the argument that portable persistency discriminates against poor and first-time buyers is a faulty one, because “that’s what happens today.”

With the loyalty discounts currently given by auto insurance carriers, those who have been insured for a long time can get a break on rates, while those who are new to the company do not get the same rates, Joseph noted.

“The notion that if you give somebody a discount, you’re going to raise somebody’s rate, is happening today with the loyalty discount,” Joseph said.

Loyalty discounts vary, with some carriers offering discounts of up to 18 percent for six years or more with the same carrier, as well as a clean driving record. Mercury offers a loyalty discount of 5 percent.

“Prop. 33 says if you’ve earned that discount, take it with you and shop,” Joseph said.

He added that the initiative if it passes would also give companies like Mercury an advantage.

“It puts us in a position to compete with other companies in a level playing field,” he said. “We’ll also be able to give the same discount.”

Consumer advocates opposing Prop 33 also include Consumers Union, and Consumer Federation of California. Those opposing Prop. 33 say that while backers promise it will give people discounts, the measure is designed to get around an existing law that prevents unfair surcharges on good drivers.

“Prop 33 allows insurance companies to charge dramatically higher rates to customers with perfect driving records, just because they had not purchased auto insurance at some point during the past five years,” Consumer Watchdog said in a statement. “Drivers must pay this unfair penalty even if they did not own a car or need insurance at the time.”

According to Consumer Watchdog, Prop. 33 would increase premiums for Californians who stopped driving for reasons including:  graduating students entering the workforce; people who dropped their coverage while recuperating from a serious illness or injury that kept them off the road; Californians who previously used mass-transit; and the long-term unemployed.

“Californians who had chosen not to drive for a time and did not need insurance would be surcharged when a new job, move or some other circumstance requires them to buy insurance again,” Consumer Watchdog stated. “Prop 33′s unfair penalty would punish drivers with premium surcharges that could reach $1,000 a year or more just because they took a hiatus from driving their automobile.”

However, according to AIA, the initiative contains language protecting those who have lost their job or been furloughed by allowing them to continue receiving their loyalty discount, it will also protect members of the military while overseas, and allow parents who qualify for a loyalty discount to pass that discount to children who reside with the, according to AIA.

And it’s Joseph’s belief that Consumer Watchdog isn’t so much against portable persistency, but that the group will attack anything that promises to alter Prop. 103, which he said the group expends great effort to protect.

“I think their position is now if you try to amend prop 103 we’re going to be opposed to it,” Joseph said.

He added, “How do the insureds get hurt by 33? They don’t. And as for uninsured, most will pay a higher rate because they’re new, and that’s the way it is right now.”