- This Week
How PG&E and Mercury Insurance are spending millions to try to trick Californians into voting for corporate interests
GUARDIAN ILLUSTRATION BY DEVON DOSS
The company's most recent annual report, filed with the U.S. Securities and Exchange Commission last month, shows California car insurance policies are the lion's share of the company's business. Almost 80 percent of its premiums are in California (followed by Florida, Texas, and New Jersey), and 83.2 percent of its $2.6 billion in total premiums cover private passenger cars (as opposed to commercial auto, homeowners, and other insurance products). In California, 81 percent of Mercury customers earned "good driver" discounts, while 19 percent are in higher-risk categories, paying much higher monthly premiums.
California's car insurance regulation system was created almost entirely by the 1988 pro-consumer ballot measure Prop. 103. That initiative established a system of regulatory oversight and financial transparency, cutting premiums by about 20 percent and limiting what companies could consider when assigning rates.
The main rating factors, in descending order of importance, are customers' driving safety records, number of miles they drive each year, and the number of years they have been driving — which all have a direct relationship to the odds of having an accident.
Before Prop. 103 went into effect in 1990, insurance companies could pretty much charge whatever they wanted, based on whatever criteria they saw fit. And that freedom became a gold mine in 1984 when the California Legislature required all drivers to have car insurance.
"After that, everyone in the marketplace is required to buy insurance and there's no protection against how much insurance companies could charge you for it, or even if they refused to sell it to you because of where you lived or the color of your skin. There were just no protections," said Harvey Rosenfield, founder of Consumer Watchdog.
So Rosenfield wrote Prop. 103 and he's been battling Mercury Insurance ever since. They've tangled in the halls of the Legislature, where politicians from both major parties have received millions of dollars in campaign contributions to push bills to undermine Prop. 103. They've fought in court in countless hearings over more than two decades, most recently on March 12 in a dispute over Prop. 17 ballot language and arguments. And they've fought in the court of public opinion, right up to today, as Rosenfield leads the fight to defeat Prop. 17.
"One of the most pernicious practices after the Legislature said you have to buy insurance was that when you went to the insurance companies and said, 'OK, I'm required by law to buy insurance, now sell it to me.' They'd say, well you didn't have it before, so we're not going to sell it to you now. Or, you didn't have it before so therefore we're going to surcharge you and double the price of insurance. Talk about a Catch 22," Rosenfield said.
Rosenfield and other consumer advocates appealed to legislators, but, he said, "Of course, the Legislature was too beholden to the insurance lobbyists to do any of the proposals that we were offering, so we went to the ballot box in 1988." And despite an $80 million campaign financed by the insurance industry, Rosenfield's group won — sort of.
"No longer would your ZIP code be the dominant determinant for how much you pay," Rosenfield said. But the struggle to implement the law continued. "That battle, just to get that put it in place, we didn't win that until 20 years after [Prop.] 103 began. We won basically in 2006, 18 years later, after court challenges and going to the [insurance] commissioner."