Any initiative driven primarily by one wealthy special interest should invite voter suspicions. And rightly so: Prop. 17 on the June 8 ballot purports to benefit consumers, but would do so by setting dubious public policy. Voters should avoid that pitfall, and reject Prop. 17.
The measure would amend state law so that insurers could give discounts on policies to drivers for maintaining auto insurance coverage. The rate reduction would apply regardless of which company provided the policy. And the measure would let insurers charge higher rates to people who have let insurance coverage lapse for more than 90 days. Just how much those discounts or surcharges might change individual premiums is unclear.
Current law, set by Prop. 103 in 1988, bans insurers from setting premiums based on whether a driver has previously had insurance. Insurers can give discounts to drivers who have been long-term customers with one company. But the law bars insurers from providing such an incentive when customers switch from one insurance company to another.
Prop. 17 backers — mainly Mercury Insurance — say the measure would reward drivers by increasing competition for their business. And they say that the 80 percent or so of Californians who maintain insurance coverage should not lose discounts just for switching carriers.
The idea has a superficial appeal, if voters ignore the likely consequences of that policy. Insurers would have to pay for such discounts somehow. The California Department of Insurance analysis notes that each insurance rate reduction generally requires an offsetting increase somewhere else. Insurers still need to have enough money to cover claims and earn profits.
The obvious way to recoup the discounts is to charge higher premiums to drivers who have not had continuous insurance coverage. But that approach would make buying insurance more expensive for the people who do not have it now, creating a perverse policy incentive. The goal should be to encourage all drivers to purchase insurance, which would provide a financial safeguard against accident or injury — and end the extra cost everyone else pays in collisions with uninsured motorists.
But there are other reasons to be skeptical of Prop. 17. One company, Mercury Insurance, is responsible for the measure being on the ballot. The company has spent more than $13.5 million so far in support of the initiative.
The idea that an insurer would spend millions of dollars because it wants to save drivers money defies credibility. Mercury’s more likely goal is to poach lucrative customers from other insurers while discouraging customers it considers less desirable.
Nor does Mercury’s record reassure voters. In April, the Department of Insurance said the company had violated state law in setting premiums, driving up customers’ costs. And Mercury had still not corrected violations stretching back to 1998, the department said.
Voters should say no to Prop. 17. Enacting a special-interest measure that creates unwise public policy would be a reckless choice.
