Posts Tagged ‘Blog’

TV Ads: No Place to Get the Facts About Prop. 17

May 4th, 2010

By Jon Healey, THE LOS ANGELES TIMES OPINION L.A. BLOG

Yes on 17

I have to admit, I’m in awe of the Yes on 17 campaign. Its new TV ad is so brazenly misleading, I found it breathtaking. In a bad way, admittedly, but breathtaking nonetheless.

The ad begins by stating, “There is only one place to get the facts about Prop. 17: the official voter guide.” Then, as it displays the guide in the background, it proceeds to quote not from the impartial, fact-checked title, summary and analysis section but from the spin that the Yes on 17 campaign inserted in the arguments and rebuttals section. As the fine print on the bottom of that section’s pages states, “Arguments printed on this page are the opinions of the authors and have not been checked for accuracy by any official agency.”

Not checked for accuracy, indeed. The ad wastes no time in veering from facts into fiction. “A flaw in current law penalizes responsible drivers by forcing them to give up their continuous coverage discount if they want to switch insurance companies,” the narrator intones. Umm, no. It’s not a “flaw” in the law, unless you consider the insurance overhaul that voters adopted in 1988 (a.k.a. Proposition 103) or the regulations that implemented it to be inherently flawed. Proposition 103 expressly barred insurers from considering “the absence of prior automobile insurance coverage” as a factor in setting premiums. And in 2002, the insurance commissioner declared it a violation of this provision to give a “continuous coverage discount” to new customers simply because they’d been insured by a rival carrier.

More important, the discount offered today is based on actuarial studies that show that drivers cost an insurer less (in terms of claims) the longer they stay with the company. Confusing correlation with causation, the Yes on 17 campaign argues that the practice of renewing one’s insurance year after year shows responsibility, and that translates into more careful driving. But this argument overlooks the data showing that riskier drivers are more likely than safe drivers to change insurance companies, and to do so multiple times. Why? Because insurers encourage them not to renew by jacking up their rates after their driving record sours.

In other words, drivers who stay with one insurer are a less risky subset of the group of drivers who remain continuously insured year after year. So why would insurers offer the same discount to both groups? Under state law, any discount or rating factor must have “a substantial relationship to the risk of loss.” I’m not a lawyer, but my reading of Proposition 17 suggests that the same would be true for the new continuous coverage discount. If so, insurers would have to make an independent actuarial showing for the current loyalty discount and the new one for continuous coverage. And given the different risks posed by the two groups, wouldn’t that result in a different discount?

The Yes on 17 campaign, for its part, maintains that the discount would be the same. According to its new ad, the proposition “allows drivers to keep their continuous coverage discount even if they change insurers.” But just to be clear, that’s the Yes on 17 campaign’s opinion. Not fact.

When Auto Insurance Customers Are The Victims

May 4th, 2010

By Shane, THE AUTO INSURANCE.COM

We’ve written quite a bit about how some otherwise honest auto insurance customers attempt to defraud their insurers – but it sometimes it works the other way as well. For example, earlier this month, we covered a case in Louisiana in which an insurance agent was pocketing customer’s premiums without writing up the policies for which they had paid (see “Insurance Fraud Continues as Recession Drags On”).

Sometimes however, it’s more insidious. Consider the case of Mercury Insurance, one of California’s largest underwriters of auto insurance policies.

Are Corporations “People”?

We discussed California’s controversial Proposition 17 a few weeks ago (”When Does a Lapse in Coverage Justify Higher Rates?”), which would allow an auto insurer to offer a “persistency discount” to a customer who switches from another auto insurer – thus forcing insurance companies to compete harder for clients. The major argument against the proposed law is that it would possibly allow auto insurers to penalize people who drop their auto coverage for a time because they don’t actually own a vehicle.

Sadly, proponents and opponents of the law have filed suits and counter-suits in civil court and have muddied the issues so badly that the average voter really doesn’t understand what’s at stake.

However, some interesting facts have come out about the legislation’s corporate sponsor, Mercury Insurance.

The Regulator’s Report

According to the California Department of Insurance (CDI), Mercury has been overcharging customers since the mid-1990s – and doing this in a variety of ways, including failure to offer discounts mandated by the state, imposing illegal “fees” and surcharges, and even outright discrimination on the basis of medical issues and even occupation.

Interestingly, Mercury has been spending millions on advertising aimed at convincing California voters to approve Proposition 17 – a law the company had a hand in writing.

The CDI report reveals that Mercury had denied coverage to drivers who are legally handicapped and is continuing to charge certain customers who are required to carry proof of coverage a surcharge equal to 15% above and beyond their premiums. The company has also been charging their customers for accidents in which they were not the responsible party and prematurely canceled policies for low income people who qualified for California’s Low Cost Automobile Insurance Plan.

Not surprisingly, JD Power, which ranks insurers in terms of customer service and consumer satisfaction, places Mercury near the bottom.

Credibility Issues

On the surface, regardless of who authored the proposed legislation, Proposition 17 would seem to be a good deal for consumers. However, controversy over “Corporate Personhood” aside (as when a corporation – such as an auto insurer – writes legislation, which is actually the job of natural, human lawmakers), at a time when people are increasingly outraged by the way business has been inserting itself into the political process, this report is very likely to destroy any credibility Mercury’s ad campaigns might have had. This makes it unlikely that Proposition 17 will pass in June.

June 2010 California Proposition Recommendations

May 2nd, 2010

By Publisher, WHATEVER IT IS, I’M AGAINST IT BLOG

Prop. 17. Allows auto insurance companies to jack up rates for people who haven’t had continuous insurance.

Another corporate-sponsored initiative (sigh).  Can we assume that Mercury Insurance did not pay millions to put this on the ballot out of a philanthropic impulse to reduce everyone’s rates?

This is another one where the arguments in the voter booklet disagree fundamentally on the facts, which means someone is lying.  I had to read the text of the prop. to find out, for example, whether there really was an exemption for lapse in coverage due to military service (only if service is outside the US).  The Yes argument claims there is protection for people who drop coverage for economic or medical reasons, but what Prop. 17 actually says is that “Continuity of coverage shall be deemed to exist even if… coverage has lapsed for up to 90 days in the last five years for any reason other than nonpayment of premium.”  But if that nonpayment was because you lost your job, what then?  There is nothing in the text of the initiative that says how that would be resolved, so, you know, good luck with that.  If this passes, I foresee plenty of frustrating phone conversations with insurance company reps.

Vote NO to frustrating phone conversations with insurance company reps.

The Nightmare Continues?

April 30th, 2010

By Jeremy Pilaar, BERKELEY POLITICAL REVIEW

Repair California’s decision in January to pull the plug on plans for a constitutional convention should serve as a wake-up call for Californians. With a convention out of the picture, a repeal of the two-thirds rule may now be the only shot voters have in 2010 at easing gridlock in Sacramento.

The call for a statewide convention was innovative, widely popular in preliminary polls, and supported by politicians on both sides of the aisle, a bright spot on an otherwise bleak civic landscape. The “Con-Con”, as it is known in political circles, seemed to be the first substantive opportunity in decades to mend California’s broken system of governance. Lamentably, backers were unable to transform that energy into results.

“The work on the Constitutional Convention received tremendous praise, but praise doesn’t put your measures on the ballot,” said Jim Wunderman, President and CEO of the Bay Area Council, the organization that first proposed the convention. “The money basically ran out.”

While far from perfect, the group’s measure envisioned a crucial overhaul of everything from the balance of power between state and local governments to the budget process itself. Only in a convention setting, its backers argued, could all of California’s woes be effectively addressed at once, from the issue of raising property taxes to reforming the cluttered initiative system. With the Con-Con gone, it’s hard to see where, or how, even piecemeal reforms get anywhere this year.

In the meantime, California’s fiscal mess has further deteriorated. The budget deficit promises to hit an unfathomable level again by year’s end, undoubtedly bringing with it another series of crippling cuts. Californians can expect to see thousands more state jobs slashed in the coming months, as well as further reductions to essential services like health care and senior assistance. There is little need to remind students and educators of the pain inflicted by the cuts in 2009. Although the Governor promised to protect funding levels for education, his budget plan has been thoroughly criticized by policy makers across the spectrum, and it is unlikely to see the light of day in Sacramento.

Some cuts will, of course, be necessary to help keep the state afloat in the short run. But as the nonpartisan Legislative Analyst’s Office (LAO) points out, the legislature “is unlikely to bring the budget into balance without adding revenues to the mix.”

Sadly, those hoping the next Governor will lead the charge on mending the state’s revenue difficulties are sorely mistaken. At a candidates forum this February held in San Francisco, presumptive Democratic nominee Jerry Brown emphatically declared that “taxes are a burden,” going so far as to refer to them as “that ugly T-word.” Meg Whitman, the leading Republican candidate, hopes to somehow lower taxes.

Ballot initiatives are also proving discouraging in this regard – indeed, not a single proposal to raise revenues is set appear before voters in June. Not surprisingly, the two notable propositions that have actually made it onto the June ballot are designed by and for corporate interests. The first, Prop 17, is almost entirely funded by Mercury Insurance, and would essentially allow private insurers to bypass current regulation in order to charge astronomical rates to customers with insurance gaps. The second, Prop 16, is PG&E’s latest attempt to crush all competition by making it more difficult for communities to form municipal utilities.

Unlike Repair California, these two propositions are hardly strapped for cash. So far, Mercury and PG&E have pumped $3 million and $6.5 million into their respective measures for signature gathering and advertising. These backward initiatives seem likely to pass in June if voters don’t stay on their toes.

That being said, there may be a silver lining on the November ballot for reformers who still hope to accomplish something this year: George Lakoff’s promising initiative, the “California Democracy Act, is slowing gathering steam.

The measure would confront what is perhaps the most toxic element of Proposition 13’s legacy: the two-thirds super-majority needed in both legislative houses to increase taxes or pass a budget. According to Lakoff, “California’s budget crisis – and so many of our state’s systemic problems – are the result of the absurd two-thirds requirement that allows a small minority, now just 37%, to block sensible economic legislation.” The proposition would alter the threshold needed to pass a budget or raise taxes to a simple 51% majority.

Critics of Lakoff’s initiative insist that its language is too broad, leaving excess room for interpretation and debate about its implementation. Even so, Lakoff’s is the only proposal currently on the table that would give the legislature a better chance of moving quickly and effectively on issues of both taxes and the budget.

Unfortunately, the path to the ballot box appears daunting. The campaign needs to collect over one million signatures by mid-April, a seemingly impossible task for an effort that is entirely grassroots. To get the initiative into the hands of voters will take a miracle in the next several weeks, and even then the measure is unlikely to pass; a field poll taken in the fall showed only 43% of respondents in favor, versus about 52% opposed. Similar propositions have also been voted down numerous times in the past.

In the all too likely event that Lakoff’s operation fails, 2010 will certainly not be the much-needed reform year state residents have been hoping for since the start of the recession. A paralyzed Legislature, fiscally conservative gubernatorial candidates, and regressive ballot measures all promise to deliver more of the same to California voters this summer and fall. I suppose it’s never too early to start planning ahead for Con-Con 2012.

If Proposition 17 Passes, Who Would Qualify for the New Discount?

April 29th, 2010

By Jon Healey, L.A. TIMES – OPINION L.A. BLOG

The Times’ editorial board came out in opposition to Proposition 17, a measure on the June ballot that would enable a new “continuity” discount for drivers who switch insurance companies. It’s a variation on the current loyalty discounts that insurers can offer to encourage drivers to renew their policies. The primary backer of Proposition 17, Mercury Insurance, argues that the loyalty discounts deter competition by discouraging people from changing insurers, and that adding a continuity discount would remedy that problem. The editorial counters that Proposition 17 is based on flawed logic and runs counter to the spirit of Proposition 103 — a 1988 initiative that tied auto insurance rates more closely to a driver’s record.

The editorial states that Proposition 17 would allow insurers “to offer lower premiums to drivers who maintained insurance for at least five years with any company.” But a spokeswoman for the Mercury-funded group Californians for Fair Auto Insurance Rates, which is running the campaign in favor of the ballot measure, disputed that, saying insurers would be able to offer the continuity discount to drivers who’d maintained insurance for a significantly shorter period of time — as short as six months, in fact.

The measure wouldn’t affect loyalty discounts, which companies usually offer to drivers who’ve been customers for much less than five years. But Proposition 17’s language on the continuity discount isn’t clear as to when it would kick in. Here are the relevant portions of the text:

[A]n insurer may offer applicants or insureds an additional discount … based on the length of time the applicant or insured has been continuously insured for bodily injury liability coverage … with one or more insurers, affiliated or not.The insurer may consider the years of continuous coverage preceding the policy effective or renewal date. This discount is called a continuity discount. Children residing with a parent may be provided the same discount based on their parents’ eligibility for a continuity discount….

Continuity of coverage shall be deemed to exist even if there is a lapse of coverage due to an applicant’s or insured’s absence from the United States while in military service, or if an applicant’s or insured’s coverage has lapsed for up to 90 days in the last five years for any reason other than nonpayment of premium. This subdivision does not limit an insurer’s ability to offer additional grace periods for lapses.

Consumer Watchdog’s Harvey Rosenfield, a leading opponent of Proposition 17 (not surprisingly, given that he wrote Proposition 103), said the only logical interpretation of the “deemed to exist” clause is that a driver must have five years of nearly uninterrupted coverage before becoming eligible for the continuity discount. But what about new drivers who’ve spent four years or less behind the wheel? You wouldn’t say their coverage “lapsed” before they started driving, would you? On the other hand, if insurers provide a grace period for them, shouldn’t they also offer the new discount to anyone who resumes driving after an extended period spent relying on mass transit? Wouldn’t they pose a lower risk than a new driver? And why should inexperienced young drivers qualify for the discount simply because they’re living with a parent who does?

Clearly, the eligibility issue isn’t as clear-cut as the editorial suggested, but it doesn’t seem as simple as proponents claim either. That’s not necessarily a reason to vote against Proposition 17, but it does raise questions about who would benefit from it. It also clouds the issue of who stands to pay more if the proposition becomes law. Just as with all current discounts, insurers would have to offset the projected revenue loss from the continuity discount with a new surcharge on customers who don’t qualify for it.

Proposition 17 Changes California’s Car Insurance Rules

April 23rd, 2010

By Jakekon, INSURANCE CHOICE IN 2011 BLOG

Proposition 17, which will appear on the June ballot in California, could result in big changes for purchasers of car insurance in California. The proposition was written and funded by Mercury Insurance, California’s fourth-largest auto insurance company.

The proposition would allow auto insurance companies to charge customers more if they have never previously been insured. Proposition 17 also penalizes drivers who dropped coverage for more than 90 days over the last five years (with an exception for overseas military personnel) or who missed one insurance payment.  Those who stopped driving and didn’t need insurance would be required to pay up to $1,000 more for car insurance when they restarted coverage. Current California law prevents that surcharge.

Those drivers who did maintain continuous auto insurance would be eligible for a continuous coverage discount, which they could keep if they changed insurance companies. Under current California law, drivers who switch insurance companies cannot receive the continuous coverage discount.

This is bad for consumers. My general rule is that if the insurance companies are spending millions on a ballot initiative, and Mercury is, then this is only good for them. Additionally, the insurance companies are trying to undermine the authority of the insurance commissioner. While I do not think the insurance commissioner should be an elected office, at least for now consumers get to have some say in who will protect them from the insurance companies. I am urging everyone to vote no on Prop. 17.

CA-Gov Brown Calls For Specific Debates, Will Not Issue Specific Positions

April 17th, 2010

By David Dayen, FIREDOGLAKE.COM

Jerry Brown tried to shake up the California Governor’s race by demanding debates with all the major candidates today, but at the same time responded to criticism for not being specific enough on the major issues facing California by talking about federal issues not under the gubernatorial purview and declining to give a position on the upcoming June ballot measures.

“I am not prepared to issue positions” on ballot measures like Prop. 17, the Mercury Insurance measure that would allow auto insurers to jack up rates for individuals if there is a lapse in their coverage, said Brown, the former Governor and current Attorney General, at a post-speech press conference. When asked again about specifically what he would do to bring jobs to the state, he cited getting banks to lend to small businesses. When told that was a federal issue, Brown said “I am a citizen of the Republic.” Pressed further, Brown said that he wold not favor new taxes unless people “want them and vote for them,” which he said was a “tough thing to say in front of this crowd.” He actually didn’t say it in his speech. He also proposed moving authority on local spending issues back to local control, decentralizing the state budget structure to a degree.

Brown said that people aren’t paying attention to the race and that “we will be more than competitive” on television in the fall. He suggested that people “will have all the information they need” to make their decision in November, and that “people will recoil from all the information” that they’ll have, an allusion to Meg Whitman’s prodigious spending. When asked why then he would call for more information through debates, Brown said they would be more substantive and of interest.

Brown didn’t seem terribly hopeful that Whitman or Poizner would actually accept the challenge. Asked if it was more likely that Whitman would release her tax return or agree to the debate, Brown said, “It’s a close question.” However, he added, “I wouldn’t have made the challenge if I didn’t entertain the possibility that they’d accept it,” and hoped it would “rise to the ministerial level” of negotiations between all the campaigns. “The Sherpas will meet next week.”

Certainly, the gubernatorial campaign won’t be dull.

No word on whether Peter Schurman, the former executive director of MoveOn.org who is running to the left of Brown in the Democratic primary on a platform of single payer health care and changing the 2/3 requirement for budget and taxes, would be allowed to participate in these debates. I’m guessing no.

Marketing to Distrust

April 14th, 2010

By Anne Landman, PR Watch.org

Enron, Goldman Sachs, Halliburton, Monsanto, Blackwater, Bank of America, Citigroup, Cigna, Aetna, Enron, Arthur Andersen, Mercury Insurance, Philip Morris… These are just a few corporate names that engender feelings of distrust, anger and betrayal. They represent scandals, greed, blatant disregard for public welfare, lavish spending of taxpayer money and other negatives, and serve as reminders about how corporate wrongdoing has brought shame on our country and harmed millions.

But as the public grows more distrustful of big corporations, corporations are fighting back by evolving more clever and sophisticated forms of public relations. Their goal? To manipulate public attitudes and assure that widespread negative feelings don’t block their ability to do business. Increasingly, corporations are engaging in variations on the theme of “corporate social responsibility,” to try and persuade us that they can be trusted again.

Steve Poizner Goes After Mercury Insurance For Possible Overcharges

April 13th, 2010

By Dennis Romero, LAWEEKLY.COM

California Insurance Commissioner Steve Poizner announced this week that Mercury Insurance “may have illegally overcharged thousands of Californians for auto and homeowners insurance,” according to a statement from his office.

An “examination” of the company found that it was sometimes raising rates on drivers who had accidents, even though the collisions weren’t their fault, and that it was excluding some bartenders, liquor store owners, painters, cocktail waitress and waiters and artists from coverage.

Mercury was quick to point out, however, that Poizner is seeking the Republican nomination for California governor. The company stated that “political interests” were at play in Monday afternoon’s big announcement.

Even Poizner’s own spokesman acknowledged that making such a big announcement about such violations was unusual. But Poizner’s office argues that the company has repeated violations it had previously agreed to fix.

Mercury is the $3.5 million main backer of Prop. 17, a November ballot initiative that would allow transferable “loyalty discounts” for drivers who change carriers. But the rates would not apply to those who let their insurance lapse, therefore becoming a clever way to raise rates on some drivers, critics say.

Poizner’s office stated that Mercury could face $5,000 fines for each violation it found.

Did Mercury Insurance Scam Its California Customers?

April 13th, 2010

By Zach Berens, LAIST.COM

As the insurance behemoth bankrolls Prop 17 on the June ballot, the company is finding their way into the news by another another route.

“An examination done by the Department of Insurance appears to show that Mercury Insurance has disregarded California’s consumer protection statutes and overcharged consumers,” Insurance Commissioner Steve Poizner said yesterday. “In addition, the Department’s examination finds that Mercury Insurance has apparently continued to violate the law despite agreements with the state to terminate its illegal behavior.”

Various allegation are being thrown at the company, including barring bartenders, liqour store owners, painters, cocktail waitresses, waiters and artists. The company also still hasn’t corrected violations made in 1998 and 2002, according to Poizner. Ouch.