Two Thirds of Assembly Members Vote To Let Mercury Surcharge Uninsured

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Group Calls Upon Burton To Put Poor Above Party’s Cash Machine

The California Assembly voted today by a two-thirds margin for eleventh hour legislation to let insurers violate voter-approved Proposition 103 and charge good drivers extra if they had been previously uninsured for more than ninety days.

Uninsured motorists will pay about an extra $125 per year while any resulting discount for those with continuous coverage would be about $65. With more motorists uninsured, however, all drivers will pay more for their “uninsured motorist” coverage to protect against being hit by an uninsured motorist — increasing the overall premium.

The bill’s sponsor Mercury Insurance greased the vote with $1,077,550 million to state lawmakers and candidates since 2000. Mercury has donated to 25 Senators and 56 Assembly Members –two-thirds of the California legislature; 45 Democrats and 36 Republicans were recipients of Mercury‘s largesse.

Fundraising committees run by Democratic leaders of the Assembly (the Assembly Democratic Leadership, Assembly Democratic Leadership Committee 2000, Assembly Democrats Voter Registration 2002) received $85,000.

The Senate Majority Fund received $100,000. Mercury donated an additional $150,000 to the failed term limit extension initiative Prop 45, led by Senate Pro Tem John Burton.

“One insurance company has bought the will of the Assembly. Now it’s up to the conscience of the State Senate, John Burton, to put the uninsured motorist and the vast majority of drivers who purchase uninsured motorist coverage above the interests of the Democratic party’s cash machine,” said Jamie Court, executive director of the Santa Moncia-based Foundation for Taxpayer and Consumers. “This bill will not pass if Senator Burton is against it, and now is the time for him to come to the defense of those drivers without lobbyists and campaign cash to give. Only an insurer who donated to two thirds of legislators can get a two-thirds vote for an eleventh hour bill that violates the voters’ will, surcharges the uninsured, and will raise premiums for all drivers, through higher prices for uninsured motorist coverage, since there will be more uninsured motorists.”

Insurance Code Section 1867.01 ( c ) prohibits surcharging motorists who are buying insurance for the first time or have suffered a lapse in coverage. Mercury and other insurers are being sued for systematically violating this law, which was enacted as part of voter-approved Proposition 103, and the Insurance Commissioner has issued new rules to prevent insurers from future violations.

Under SB 689:

‘ Uninsured motorist will face a surcharge, and therefore the cost of insurance will be prohibitive for many — more drivers will not purchase insurance. The cost of “uninsured motorist coverage” for all drivers to protect themselves, a separate portion of the premium, will go up. This is the fastest growing component of premiums to protect the insured driver against the uninsured.

Mercury Insurance data filed with the Department of Insurance shows that the surcharge on uninsured motorists will be twice any potential discount for continuously insured motorists — since there are more insured to spread the discount out to and less uninsured to bear the penalty. The least able to afford insurance will see about a $125 premium surcharge to finance a potential $65 discount. However, with more uninsured on the road, everyone will pay more for uninsured motorist coverage. There is NO GUARANTEE in the bill THAT ANY DRIVER WILL PAY LESS OVERALL.

‘ The Insurance Commissioner sets rates lawfully because his office is best equipped to sort out this confusing statistical maze. The only reason Mercury has come to this legislature is because it is losing the battle at the Department and in the Courts. Voters prohibited the legislature from doing exactly this — allowing a surcharge for uninsured motorists. What kind of precedent does it set for an insurer to run to the legislature when the Insurance Commissioner and the Courts agree that a practice is wrong?

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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