Insurer, a Prop 17. Backer, Alleges Bias
By Timm Herdt, THE VENTURA COUNTY STAR
SACRAMENTO — Less than two months before voters will be asked to decide on a controversial auto insurance initiative sponsored by Mercury Insurance, Insurance Commissioner Steve Poizner on Monday alleged the company “has disregarded California’s consumer protection statutes and overcharged consumers.”
Poizner said that Department of Insurance examiners discovered thousands of cases in which Mercury illegally overcharged for auto and homeowners insurance policies — in some instances, he alleged, repeating violations the company had agreed in the past to correct.
Among the allegations are that Mercury did not properly apply credits that were due on homeowners’ policies, did not abide by state law in evaluating policyholders’ driving records, and subjected people in certain occupations such as cocktail waitresses, bartenders and artists to standards that did not apply to others.
In a statement, the company denied the allegations and said they arise from disagreements in the interpretation of state laws and regulations. “We don’t engage in practices that would overcharge our customers,” the statement read.
The statement further accuses Poizner, who is seeking the GOP nomination for governor on June 8, of orchestrating the release of the report “to further the political interests of the commissioner, not the people of California.”
Department of Insurance spokesman Darrell Ng responded that Mercury “should be less concerned about any imagined conspiracy theories and more concerned about following the law. The department is taking strong action against a company that we believe illegally overcharged their customers.”
The charges come as Mercury is pushing a ballot measure, Proposition 17, that would establish in California a surcharge that critics say has resulted in premium hikes as high as 90 percent for Mercury customers in other states who have experienced a lapse in coverage.
Mercury is the sponsor of the initiative and has contributed $2.5 million to the campaign, about 70 percent of all the money the campaign has raised.
“This ought to be the nail in the coffin for Proposition 17 for any voter who’s paying attention,” said Harvey Rosenfield, founder of Consumer Watchdog and author of California auto insurance regulatory law, Proposition 103. “It’s a recognition by the Department of Insurance that Mercury is a particularly bad actor. Voters and the public need to understand more about this company.”
Kathy Fairbanks, spokeswoman for the Yes on 17 campaign, said the violations alleged by the Department of Insurance “are not related to what Proposition 17 would do and how it would operate. For opponents to claim otherwise is another attempt by them to direct attention away from the fact they are opposed to a measure that will benefit 80 percent of California drivers.”
Under Proposition 17, companies that recruit policyholders from other companies would be allowed to offer “persistency” discounts to those who have had continuous auto insurance coverage. Under current law, a company can offer such discounts only to customers based on their years of coverage with that company.
Consumers would be eligible for such discounts as long as their auto insurance coverage had not lapsed for more than 90 days for any period over the previous five years.
Rosenfield of Consumer Watchdog argues that the driving motivation behind the initiative is the desire of Mercury to be able to levy premium surcharges on any drivers who have not had continuous coverage for the previous five years, such as new drivers, those who have had prolonged medical conditions that prevented them from driving, or those who have gone for periods of time without a car.
“When was the last time an insurance company put a proposition on the ballot to lower people’s insurance rates?” asked Rosenfield. “Answer: Never.”
Ng said the timing of the Department of Insurance allegations is coincidental to the proximity of the vote on the Mercury-sponsored initiative. “The enforcement action was filed when it was ready,” he said. “It would have been improper to withhold this until after the election.”
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