California Initiative Will Ask Voters to Expand Persistency Discounts

By | August 15, 2011

The California Attorney General’s office last week released a title and a summary of a proposed ballot initiative that would allow automobile insurers to offer “persistency discounts” to new customers.

The bill is being sponsored by the American Agents Alliance. In a statement, the Alliance says the initiative’s new law “will allow consumers to receive a discount for their years of continuous automobile coverage regardless of the company where they seek insurance.”

Under the current law, the persistency discounts can only be offered to current consumers who have been insured by the company continuously for a number of years.

“The way the law is written now rewards insurance companies,” Mike D’Arelli, executive director of the Alliance, in the statement. “We believe that giving the consumers control over their discounts will increase competition between insurance companies, lower costs, and insure more people.”

The new initiative is similar to Proposition 17, an initiative that was put on the California ballot in 2010. The Proposition 17 campaign was sponsored largely by Mercury General Corp. It was opposed by most newspaper editorials, and by the group Consumer Watchdog, which is often at odds with Mercury General. Despite the opposition, the insurance industry hugely outspent the proposition opponents and the initiative was only narrowly defeated, 52 percent to 48 percent.

The new initiative is being supported personally by Mercury’s chairman, George Joseph, but not, technically, by Mercury, a company spokesperson told the Los Angeles Times.

It is thought that Mercury would benefit under the new law because it has lower rates and would be at an advantage in attracting low-risk drivers away from other insurers.

Like the last initiative, this new one is drawing criticism from Consumer Watchdog. In a statement released last week, the group says the new initiative will allow insurers to impose a surcharge on persons who did not purchase automobile insurance at some point during the previous five years, even if they were not driving.

The group says the surcharge could be a surcharge of as much as 40 percent.

Topics California

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