The Company is supporting the Continuous Coverage Auto Insurance Discount Act (“Proposition 17”), a California ballot initiative which will be on the June 2010 ballot. If passed, Proposition 17 will provide for a portable persistency discount, allowing insurance companies to offer new customers discounts based on having continuous insurance coverage from any insurance company. Currently, the California DOI allows insurance companies to provide persistency discounts based on continuous coverage only with existing customers. While the company strongly believes this will be beneficial for the insurance consumer, there are consumer activist groups both supporting and opposing the initiative. The Company made financial contributions of $3.75 million, $0, and $3.5 million during April 2010, the first quarter of 2010, and 2009, respectively, related to this initiative. The Company expects to continue supporting the initiative with financial contributions.

A quick reading of this disclosure reveals three misleading statements:

1. Mercury is not simply “supporting” Proposition 17. Mercury wrote the initiative and has put in 99% of the more than $7.25 million that Mercury’s campaign committee has reported receiving (the rest comes from insurance agents). Perhaps because virtually all newspapers have editorialized against Proposition 17, Mercury’s management seems to be trying to put a little distance between itself and its creation. But in my mind, there is a major difference between “support” and “sponsorship.” I wonder how many shareholders would have preferred to be consulted by management before the company went ahead with this cynical multimillion-dollar boondoggle? The management plans to spend an additional amount – likely in the millions – between now and Election Day. Don’t they owe Mercury’s shareholders an estimate of how much more they plan to spend? Or perhaps the shareholders think that the surcharges Mercury will be allowed to collect under 17 will be good for the bottom line.

2. Mercury suggests that the California DOI is responsible for preventing the company from offering “discounts” that Proposition 17 would authorize. Wrong: it’s California law, which, since the passage of Proposition 103 in 1988, bars insurance companies from considering a person’s history of prior coverage when setting premiums. The voters prohibited the practice because it led to massive surcharges and more uninsured motorists on the road. Mercury got caught violating that law and was forced to stop doing so by the Insurance Commissioner and the courts.

3. Here’s a favorite: Mercury says, “there are consumer activist groups both supporting and opposing the initiative.” But legitimate consumer organizations like Consumer Watchdog and Consumers Union, the non-profit publisher of Consumer Reports magazine are all opposed to 17. Mercury has listed “Consumers First” and several other supposed “consumer groups” as supporting 17, but when researched and investigated by journalists, it turns out these organizations are either phony groups created by public relations firms or are run by spokespeople paid by Mercury.

Three more reasons why you can’t trust Mercury Insurance or Proposition 17.

This is the company that just a few weeks ago was accused by state regulators of overcharging its own customers and dozens of other violations of state insurance laws. That came on top of reports of previous investigations which concluded that the company routinely penalized people for such risky activities as working out of their own homes.

Mercury’s ad buy – now over $7 million – is timed to coincide with the beginning of absentee balloting. With virtually every newspaper in the state urging people to vote NO on 17, with no one but insurance agents appearing to defend Prop 17 against universal criticism by consumer and taxpayer advocates, Mercury apparently decided that deceit was the only alternative.  I don’t think it’s gonna work. Californians are instinctively suspicious when they start seeing slick thirty second ads promising lower insurance rates. Soon Mercury’s sponsorship will be discussed at office water coolers  and at dinner tables across the state. Then people will ask, “Since when does an insurance company spend millions to save me money?” The answer is obvious.

The official ballot materials written by the Attorney General are going to tell voters that Mercury’s Prop 17 will allow auto insurance companies to raise premiums for many motorists.

You can read our press release here or the Los Angeles Times coverage here.

Mercury’s legal attack shows it is willing to stop at nothing to deceive Californians about Prop 17, which will raise premiums on millions of Californians by as much as $1,000 per year, or possibly even more. Members of the military, students and others who stop driving for good reason will be unfairly punished.

Now we need to get these facts out to the voters. Please contribute as much as you can to help us win this just fight.

Thanks for all your support.

Harvey Rosenfield

Consumer Watchdog Founder

Have you ever had a lapse in auto insurance coverage for any reason? Tell us your story.

To support our work, please make a contribution here:

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Wow! Mercury Insurance has sued to stop me, former Attorney General John Van De Kamp, and former Insurance Commissioner John Garamendi from warning the public in the Official State Voter Guide about the huge premium increases to come under Mercury’s Prop 17 for millions of drivers.

Mercury also says it’s going to court against Attorney General Jerry Brown, who has just issued his official analysis of Prop 17 for the Voter Guide. Brown states clearly that 17 will allow insurance companies to raise premiums for those who have a lapse in their auto insurance coverage or missed a single insurance payment.

We already knew this corrupt insurance company would spend tens of millions of dollars to lie to voters about Prop 17 — it spent $3.5 million just to stick the measure on the June ballot. Now Mercury is trying to censor our views and deceive the voters–using taxpayers’ money.

We’re not going to let Mercury get away with it! Today we filed our own lawsuit against Mercury, asking the courts to strike the devious lies and tricks that Mercury wants to put in Voter Guide. You can read the lawsuit here.

The showdown over our right to tell voters the truth about Prop 17 will be in Sacramento Superior Court on Friday March 12th. I am confident of complete victory, but we could sorely use your help to support the legal team we have had to hire to fight back against Mercury’s attempt to keep voters in the dark about its dangerous Prop 17.

Please make a contribution today to our legal defense fund and the campaign to stop Prop 17. You can read the ballot arguments we are suing to protect here.

Thanks again for all your support,

Harvey Rosenfield

Consumer Watchdog Founder, and Author of Prop 103

Mercury Insurance Company has been telling everyone that their June ballot initiative will not raise people’s auto insurance premiums. But the company’s own website proves Mercury is lying.

Watch the video I made when I went on Mercury’s web site.

I plugged in a zip code for Nevada, where state law allows insurance companies to penalize motorists in ways California doesn’t, and lo and behold! In Nevada, consumers who Mercury doesn’t want to insure get smashed with a 73% increase in their insurance rates under the provision the company wants to legalize in California.

In Florida, it’s 227%!

Mercury’s ballot initiative will legalize these kinds of surcharges in California – surcharges that we outlawed with Proposition 103 in 1988.

Mercury also lied about its initiative to Attorney General Jerry Brown – who is required by law to publish an independent and objective summary of the Mercury Initiative that will appear on the ballot – and he believed them!

Attorney General Jerry Brown must give voters the full story about the Mercury Initiative. Take a moment to call (916-324-5437) or write Brown and let him know you are depending on him to tell voters that premium increases are coming if Mercury’s initiative passes.

You could be hit with surcharges if you ever missed a payment. You’ll pay more if you or a member of your family, at any time during the last five years, dropped coverage while away at school, hospitalized or because you sold your car or didn’t need insurance for any reason. Or if you are one of the hundreds of thousands of Californians who are forced to stop driving because the economy is so bad. Mercury even wants to surcharge people who didn’t have car insurance while serving in the military in the United States.

You can learn more about Mercury’s deceptive ballot measure at StopTheSurcharge.org.

You shouldn’t be penalized if you’ve done nothing wrong. For twenty-two years, Proposition 103 has protected you against swindles like this. Now Mercury wants a get-out-of-jail-free card. Please help me stop them. Sign up to become part of our campaign and send us a donation at StopTheSurcharge.org.

Many thanks,

Harvey Rosenfield

Author of Prop 103

Please read the article below and send a free message to Mercury telling George Joseph that billionaire businessmen shouldn’t be taking advantage of the economy to prey on insurance consumers.

Thanks for your help,

Harvey

http://www.latimes.com/business/la-fi-hiltzik2-2009jul02,0,1795869.column

Michael Hiltzik

July 2, 2009

Mercury General using guise of benevolence to assault Prop. 103

The auto insurer’s alter ego, Californians for Fair Auto Insurance Rates, is sponsoring a bill that it says will surely lower our insurance bills.

The art of setting automobile insurance rates is incomprehensible to most of us civilians. Liability coverage, comprehensive insurance, assigned risk pools, discounts, surcharges . . . the list goes on. Just try to figure out how your carrier arrived at the figure at the bottom of your itemized bill — I know nuclear physicists who can’t do that math.

So when industry lobbyists cook up a ballot initiative they claim will bring down rates, one’s first instinct should be to cry, “Whoa!”

That brings us to the proposed “Continuous Coverage Auto Insurance Discount Act,” which its sponsor, Californians for Fair Auto Insurance Rates, says will surely lower our insurance bills.

Never heard of that organization? You may know it by its alter ego, Mercury General Corp., the state’s third-largest auto insurer.

Mercury — excuse me, CalFAIR — filed the continuous coverage act with the state secretary of state’s office two weeks ago. Its strategy is to start collecting signatures for the initiative this fall, in time to get it on the ballot next June.

Since it sometimes takes little more to geta ballot measure approved in this state than concocting a deceptively beguiling advertising pitch and raising the cash to pay an army of signature collectors, and since Mercury has about $4 billion in assets, we can safely assume that we’ll be hearing more about this one in the near future.

Therefore, as a public service, I’m going to shake the skeletons out of its closet now.

The proposal is essentially the latest attempt by Mercury to eviscerate Proposition 103. That’s the 1988 ballot measure that dramatically reshaped insurance regulation in this state by giving an elected insurance commissioner the authority to approve property and casualty rates before they go into effect.

Auto insurance carriers were a particular target of Proposition 103, because the industry was viewed as especially discriminatory and arbitrary, and because the state’s mandatory insurance law gave motorists little choice but to buy coverage.

To bar the redlining of underprivileged neighborhoods, the measure strongly discouraged the use of ZIP Codes in setting rates. Henceforth, the primary factors were to be the driver’s safety record, the number of miles driven annually and the driver’s years of experience.

Proposition 103 specifically barred insurers from using the absence of a prior policy as a factor in rate-setting for any driver. The concern was that higher premiums based on that factor would discourage uninsured motorists from getting legal.

“That was one of the big problems before 103,” says Harvey Rosenfield, the measure’s author and the founder of Santa Monica-based ConsumerWatchdog.org. “California had absolutely no regulation, and you could be surcharged if you didn’t have insurance before.” (Is Rosenfield girding for battle over the Continuous Coverage Act? That’s like asking whether a lawyer knows the fastest way to the courthouse.)

Nothing in Proposition 103 prevents insurers from giving discounts to their own customers based on the length of time they’ve remained loyal to the same company. But the insurance department ruled that to offer discounts based on continuous coverage by other companies was in effect the same as imposing a surcharge on all those without such “persistency,” to use the industry term. Consequently, the agency outlawed that kind of discount.

In the two decades since the enactment of Proposition 103, California insurers have mounted a persistent effort to chip away at the measure. They’ve gone to court, showered the odd insurance commissioner with campaign contributions and tried to push revisions through the Legislature.

That in itself should give voters pause, because Proposition 103 is one of the most successful ballot measures ever. From its enactment in 1988 through 2005, according to the Washington-based Consumer Federation of America, auto insurance in California dropped from the third-costliest in the nation to 18th. Average premiums, which had been 30% higher than the national average, declined to dead even.

Nor did this measure deprive auto insurers of reasonable profits — the profit margin of California insurers from 1997 to 2006 was 10.1%. That ranked 17th in the nation, according to the federation, which got its data from the National Assn. of Insurance Commissioners.

No one’s been more determined to rewrite Proposition 103 than Mercury and its founder and chairman, George Joseph. The 87-year-old Joseph is known for detesting Proposition 103, and for not being reluctant to spend millions of dollars to rewrite it. When it comes to Proposition 103, in fact, he’s sort of an antimatter Harvey Rosenfield.

One of his specific targets is the ban on no-prior-insurance surcharges. It shouldn’t surprise anyone that bills allowing insurers to give persistency discounts got passed in 2002 and 2003 by Mercury’s wholly owned subsidiary, the California Legislature.

(State figures show that Mercury made campaign contributions to 70 of the 120 state legislators in 2001-02, and to 91 of them in 2003-04. Incidentally, when Proposition 89, which would have tightened limits on big-money contributions to political candidates and initiative campaigns, appeared on the 2006 ballot, Joseph spent $100,000 to defeat it. I wonder why. Anyway, it lost.)

Then-Gov. Gray Davis vetoed the discount bill in 2002. But the next year, when he was fighting for his political life in the recall election, he signed the measure. Mercury donated at least $175,000 to his campaign that year.

A state court of appeal threw the statute out in 2005 on the grounds that it undercut Proposition 103.

As the court took pains to observe, in actuarial terms a discount offered to one group is functionally identical to surcharging everyone not in that group. In other words, if you’re offering a discount to customers who have kept up their insurance with any carrier, you’re in effect surcharging anyone who is either a new customer or has had a break in coverage — such as those who temporarily dropped their coverage because they couldn’t afford it, or who had injuries that kept them from driving for a few months.

That’s important, because the most common argument you’re going to hear in favor of the new initiative (which is almost identical to the 2003 bill) is that it’s not about surcharging anyone, it’s about “expanding” a “discount.”

“We’re going to give customers an option they don’t have,” says Jim Conran, a former state consumer affairs official under Republican Gov. Pete Wilson who is co-chairing the initiative campaign.

You’ll also hear that the initiative will make the California insurance market more competitive. It’s not clear what the measure’s backers mean by this, since the Consumer Federation’s data show the California market to be the fourth most competitive in the nation.

Anyway, one should wonder why Mercury, which is already one of the leading insurers in the state, would spend heavily to make its home market more competitive. I’m inclined to think the company has something else on its mind, and I’d bet that giving customers a break isn’t it. Forewarned is forearmed: Hang on to your wallets.

Michael Hiltzik’s column appears Mondays and Thursdays. Reach him at michael.hiltzik@latimes.com, read previous columns at www.latimes.com/hiltzik and follow @latimeshiltzik on Twitter.