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Pro: It’s Good for Consumers

Nov15

By Jim ConraConran Head Shotn
Special to Calbuzz

Signature gathering is underway for a 2010 initiative which will fix an inconsistency in auto insurance law, expand an already-existing discount and lower auto insurance rates for millions of California consumers who abide by California law and maintain auto insurance coverage.

Under current law insurers can give existing customers a discount for having continuous auto insurance coverage (sometimes called the loyalty discount), but if that customer wants to switch insurance companies the new company is prohibited from providing that same customer that same discount.

The Continuous Coverage Auto Insurance Discount Act ensures all drivers who maintain their automobile insurance coverage are eligible for this discount even if they change their insurance company. Who benefits? The more than 80% of consumers who maintain auto insurance.

This includes working families, single parents, elderly and young drivers. Changing the law to allow insurance companies to offer the same discounts to new and existing customers will make the auto insurance market more competitive.

If auto insurers want to attract new customers and keep their existing ones, they will have to offer lower prices, better plans and better service. Increased competition and lower rates is a good thing, especially in these tough economic times.

This measure does not in any way change the primary factors that currently determine a person’s auto insurance rates under California law. Insurance companies still will be required to base your auto insurance rates primarily on your driving safety record, miles driven annually and driving experience. And other discounts, like the good driver or student discount, will remain in place.

Disappointingly, there are a few who are trying to defeat this pro-consumer measure. Recognizing the uphill battle before them, they have attempted to cloud the issue by implying this very simple measure will cause massive upheaval in the market and have an adverse affect on some consumers. Specifically, they claim that because insurance is a “zero sum game” any discount provided to one class of customers has to be offset by another group of customers.

They are wrong. This initiative does not create a new discount, it only makes portable a discount already being provided to the vast majority of California drivers who continually maintain auto insurance coverage.

Currently, 82% of drivers are insured. Thus, the overall amount of insurance premium in the system does not change since it’s already factored into rates for eligible and non-eligible drivers. The only thing that would change is that customers would be free to shop around and shift from one insurance company to another without losing their continuous coverage discount.

Under current law, consumers are punished for switching auto insurance companies. Under this proposed initiative they would be free to keep their continuous coverage discount and seek out additional savings.

Much has also been made of the fact that the initiative is being spearheaded by Mercury Insurance. Clearly Mercury wants to offer this discount to lure new customers and increase its business in California.

But the only way it – or any insurer — can gain market share is by offering better rates or plans than the competition. And that, of course, means consumers will have more options and lower prices. That’s a very clear benefit and one that deserves voter support.

Jim Conran, the former Director of the California Department of Consumer Affairs, is President of Consumer First and co-chair of Californians for Fair Auto Insurance Rates


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There are 4 comments for this post

  1. avatar Ave7 says:

    Source credibility. It’s a tough nut to crack with California voters. You can make all the pro-consumer arguments you want, but in the end, this is a for-profit bought initiative bought and paid for by a for-profit company.

    Californians aren’t dumb enough to believe that Mercury would spend all this money because consumers will win. That’s like believing that Chevron spends money to protect the environment or Enron spent money to lower our utility rates.

    I hope the adeptly named Conran is getting paid up front. It was only 21 years ago that another con-con man scored $6 million for fronting for the auto insurers. We’ve seen this movie before…

    • avatar sqrjn says:

      What an infuriating opinion, the way he uses “primarily” is just insulting. Sounds like a shill to me. Either its going to allow insurance companies to raise rates based on your coverage history or it isn’t, the discount is just subterfuge.

      Here is how I think the went down. Mercury ins. hires lawyers to write it, the AG’s office writes a summary, Mercury ins. doesn’t like the summary cause they don’t think it will pass, Mercury ins. hires lawyers to rewrite it (making it intentionally obscure on the increase issue), the AG’s lawyers rewrite the summary the best they can based on the new obscure initiative. Mercury has won, confounding democracy and once again perverting the initiative process.

    • avatar OC Progressive says:

      What sqrjn said!!!

      Although I’m still fond of the idea of including no-fault coverage in the price of gas. Simple, efficient, and ties miles driven and vehicle size into the equation while completely eliminating uninsured drivers.

  2. avatar SezMe says:

    Ave7 is right. How many times are we going to see a for-profit corporation spend millions of dollars to buy votes for a prop that “helps the little guy”. Riiiight.

    Think of it from the view of a first-time car buyer or someone moving in from out of state. If Mercury really does offer the best insurance for the lowest price, then Mercury will get that new customer’s business. In that case, Mercury does NOT want transportability of the continuing customer discount because it is a powerful incentive for the buyer to stay with Mercury.

    Let us also posit that Mercury is not dumb.

    My only conclusion is that this Proposition, like so, so many others is a scam designed to raise corporate profits.

    Nice try though.

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