Insurance companies operating in California will be allowed to offer discounts to drivers who maintain coverage, under a law recently signed by Gov. Gray Davis. The measure has been soundly criticized by consumer advocates, who have claimed it will penalize first-time insurance buyers.
The measure, S.B. 841, which could also lead to higher premiums for drivers who let their coverage lapse for more than 90 days, was signed nearly a year after a similar bill was vetoed by the governor. In a statement accompanying the signing of the bill, Davis said the veto last year was accompanied by a request for the state Dept. of Insurance to study the issue. That study was inconclusive, but Davis said his advisors have convinced him that, “SB 841 furthers the intent of Proposition 103 by encouraging rate competition among insurers if an insured is allowed to shop for the best rates without fear of losing their persistency discounts and thus, SB 841 actually encourages a competitive marketplace and rate competition among automobile insurers.”
Opponents of the measure, however, said the bill would discourage drivers who do not currently have insurance from obtaining coverage. They have also pointed to political contributions made by a chief supporter of the bill, Mercury Insurance, to political campaigns, including a $220,000 to Davis’ campaign.
“This governor clearly cares more about the interest of Mercury Insurance than drivers and voters,” said Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights. The Foundation has promised to sue to stop the measure.