As Californians prepare to vote on a new law which will allow insurance companies to offer discounted rates for new clients who can prove that they had continuous coverage with any licensed insurer for a period of five years or more, Mercury General is raising its rates an average of 4% per policyholder.
Opponents of California’s Proposition 33, which is supported by Mercury chairman George Joseph and other insurance company heads, predict that the insurer’s new rates will raise costs to its policyholders by an estimated $63 million, thus contradicting the ballot’s measured promise that passage will lower costs for safe and insured drivers.
According to Mercury’s critics, which include Consumer Watchdog and the Consumer Federation of California, the insurer is seeking to make larger profits in California and not, as Proposition 33 claims, reward drivers who follow state law, buy auto insurance, and decide to change insurers after holding continuous coverage for five years or over. Prop 33’s detractors say that Joseph’s company has a long history of abusing its customers and ignoring state law in an arrogant manner.
However, Mercury and other insurance companies which support Proposition 33 argue that California’s current insurance laws punish good drivers by not permitting them to get a discount on a policy if they change insurers after earning continuous coverage. They also say that the new law will benefit consumers by forcing insurance companies to compete for drivers’ business.
One key provision in Proposition 33 is that drivers will only be eligible for the continued discount if they have not had a lapse in payments over a 90 day period before switching insurers.
Opponents of the measure say that it will have a negative impact on consumers, including people who have been unemployed for extended periods, students, and people who are recovering from serious illnesses. These individuals are likely to have dropped auto insurance due to what they thought were mitigating circumstances and thus lost their continuous coverage.
Joseph, who is currently ranked at 392nd in the Forbes 400 list of billionaires with a fortune estimated at $1.1 billion, has spent $8 million to promote passage of Proposition 33.