The malevolence of Mercury Insurance

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Last year, Consumer Watchdog's "You Can't Trust Mercury Insurance" billboard in LA was removed after the company complained

Yesterday’s San Francisco Chronicle reports on a long history of illegal practices by Mercury Insurance – including discrimination against soldiers, artists, bartenders, and other professions in auto insurance coverage and rates – and the long-overdue political and regulatory attention being paid to the company.

But that’s just the tip of the iceberg. The real story of Mercury’s dealings in California is even more insidious, and it has implications to the health care reform legislation being pushed by President Obama and congressional Democrats, which would require all Americans to buy health insurance, just as all California motorists are required to buy car insurance from Mercury and other companies.  

Documents from the California Department of Insurance (275 pages worth, which we also obtained and which you can download here) detail the Mercury’s deceptive practices, but it was hardly a secret how Mercury operated, brazenly and openly defying standards and regulations that voters created in 1988 by approving Prop. 103.

The author of that measure, respected activist Harvey Rosenfield of Consumer Watchdog, has been sounding the alarm about Prop. 17, a measure that Mercury has placed on the June ballot that would overturn key parts of Prop. 103, allowing insurance companies to jack up premiums for those who haven’t been loyal and continuous insurance customers that paid every bill on time.

Rosenfield recently stopped by the Guardian and offered a fascinating history of insurance regulation in California – and his battles with his number one nemesis, Mercury Insurance.

“Prior to the passage of Prop. 103, which the voters approved in 1988, insurance companies were not regulated in California. They could basically get away with anything and they did. In 1984, the state Legislature mandated that people buy auto insurance and guess what happened? 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,” Rosenfield told us.

“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.”

So consumer groups sued and Rosenfield started writing Prop. 103. In 1987, the courts said this was a legislative issue, not a judicial one, so the groups turned to the California Legislature.

“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. Prop. 103 did many things: it called for a rollback, requires insurance companies to open up their books and justify premiums, it requires auto insurance companies to base your premium on your driving record, the number of miles you drive every year, and your driving experience. No longer would your ZIP code be the dominant determinant for how much you pay. And that battle, just to get that put it in place, we didn’t win that until 20 years after 103 began. We won in basically in 2006, 18 years later, after court challenges and going to the commissioner.”

While Prop. 103 allows the insurance commissioner to set additional reasonable factors in setting insurance premiums, Rosenfield said, “The one rating factor that Proposition 103 prohibits is the one that insurance companies used before. Prop. 103 says you cannot base insurance premiums or refusing to insure somebody on the absence of prior insurance.”

But as the new documents and other court findings showed, Mercury ignored that provision and used it as a factor anyway, setting a surcharge of about 45 percent of the premium price if you hadn’t had insurance before, for which they were again sued.

“Mercury realizes they’re going to lose the civil suit, goes to Sacramento, spreads a fortune in campaign contributions, and lo and behold, gets a bill passed overriding this provision of Prop. 103, legalizing its surcharges. [Gov. Gray] Davis vetoes it in 2002 on the grounds that it violates Prop. 103. Another year goes by, Mercury spreads even more money around, and this time Davis is up in a recall election and needs Mercury’s money. So he takes the money, it’s $100,000 or more, and Davis signs the bill. We have to go to court and challenge the bill as an unconstitutional amendment to Proposition 103, which we finally succeed in doing and it’s upheld by the Court of Appeals in 2005. All that time, Mercury is overcharging people. Ultimately, Mercury is told, the law you sponsored is invalid and you can’t do it anymore, so it stops in 2005 – 10 years of wanton, brazen violation of the law. And that brings us to the Mercury initiative.”

But because these surcharges are so lucrative – in some states, a Consumer Watchdog investigation found, doubling or tripling premiums – Mercury decided to spend millions of dollars to place Prop. 17 on the June ballot, and it will spend millions more to fool consumers into believing that its somehow good for them.  

“The Mercury initiative is even more pernicious than what it was doing before, and here’s why. Under Mercury’s initiative, if you’ve never had prior insurance, you can be surcharged for the first time. It overturns the Prop. 103 provision and legalizes these surcharges. Then they’ve thrown in some other tricks and traps, as you’d expect an insurance company to do on a ballot measure.”

What are those tricks and traps? How have they been able to get away with this for so long? Why did Attorney General Jerry Brown, a candidate for governor, give the measure such a favorable and misleading ballot title and summary? Why has the Democratic Party been so unwilling to challenge them? We’ll have much more on Mercury and its corrupting corporate influence in future issues of the Guardian.

Coby King, Mercury's vice president and spokesperson, wouldn't speak directly about the newly revealed documents or the concerns they're causing among regulators and politicians, sending us the same prepared statement he send to Chronicle, which says consumer groups are trying to "mislead consumers and rehash old allegations."

Yet I pressed him on why Mercury has for decades shown such contempt for the regulatory framework created by Prop. 103, which the company has now challenged through lawsuits, sponsored legislation, lavish political contributions, the new ballot measure, and even through blatant violations of the law. He tried to refer me to Kathy Fairbanks, who headed the Mercury-backed front group, Californians for Fair Auto Insurance Rates, which is pushing Prop. 17.

But when I noted that the group is supposedly independent of Mercury, and it is the company's hostility to Prop. 103 that I was asking about, he finally said this: "Prop. 103 is the law of the land, but to the extent there are improvements that can be made that are pro-business and pro-consumer, Mercury has not been shy about acting in the public interest."

Ah, so it's the public interest that Mercury has been acting in. Got it.

 

Comments

Thank God for Mercury insurance. Keeping rates low for the middle class. Yes on 17.

Posted by Guest on Feb. 11, 2010 @ 11:00 am

Yes on prop 17! This is going to lower rates for the majority of the people who have been responsible, paying customers who've had insurance. Why should I (who's always had insurance) pay the same rates as someone who's never had insurance (and more apt to be irresponsible and a bad driver)? Plus this law will allow everyone to cross-shop other insurance companies to get the best rates possible! Competition will force down rates. This measure is totally pro-consumer. Say yes to lower insurance premiums!!

Posted by Harvey Rosenfield on Feb. 15, 2010 @ 8:47 pm

Prop 17 will lower rates for people that have been responsible and paid their insurance bills. Also, it will make it more likely that people will pay their insurance premium on time to maintain the discount INSTEAD of putting it off and then driving without insurance. Nobody is forced to purchase Mercury, but I have had them for 6 years now and the rates have continuously stayed low for me and the customer service is amazing and has only got better. Furthermore, why would one support a company that does not care about you and forces you to only get through to a recording(lizard company). Prop 17 will make it possible for companys like Mercury to be more competative with other company's and provide ANOTHER discount.

Also, I love how you call it discrimination, when Mercury doesn't provide discounts for Soldiers, bartenders and artists. Well why not include
all the professions they do provide discounts for such as Teacher, scientists, lawyers etc.

Posted by YES on prop 17!!!! on Feb. 25, 2010 @ 8:20 am

To the blog poster ... please never call yourself anything resembling a journalist. God forbid you'd have to learn to stop parroting the d-bag that is Harvey Rosenfeld, and put out more than poorly researched pablum for your typical drive by media consumers.

What this legislation is attempting to do is "reward" those customers who keep their insurance coverage in force continuously with a discount! There is no increase to those buyers who have not kept insurance in place continuously. Such nonsense! It's discrimination because they are not rewarded with a discount? Laughable!

Where's the outcry against the power companies who make their customers give them a HUGE deposit before they will turn on their electricity at a new residence if they havent paid their bills "on time" - every month? THAT is a surcharge - increase.

Mercury charges people with no prior insurance coverage or a gap or lapse in coverage - a standard rate - everyone one qualifies for it. No discrimination.

However; if you've maintained continuous prior coverage with them, or allstate or travelers or carrier x y z - and can prove it ... you're entitled to a DISCOUNT!!! A reward for maintaining insurance as required by law!

Ok so Im going to sue the credit card co's and any retailer that offers Rewards points for giving me discounts for frequent or regular purchases! So the same logic should apply to all those businesses who offer a credit or discount off your next purchase or incentives to switch from say ... Cisco to Intel or Verizon to T-Mobile.

So then shouldnt Accident FREE discounts like Allstate offers be discriminatory to those clients of theirs that have had accidents.

"Whhhhaaaa Billy Bob gets an accident free discount on his insurance policy and I dont because I crash all the time ...... discrimination!"

"Whaaaaa ... Suzy got a discount from Mercury cuz she always keeps her insurance coverage in place and doesnt drive without coverage. Im not entitled to that same discount because I didnt bother to do that, and I broke the law anddrove without coverage ... whaaaaa its just not fair!"

Harvey Rosenfeld = socialist idiotic d-bag - with literally zero common sense trying to make a name for himself. Anti consumer moron using inner city LA dwellers as his tool.

Prove me wrong.

Posted by Guest on May. 02, 2010 @ 10:41 am

Since insurance is mandated by the state, Prop. 17's scheme to discriminate against people who have to choose between paying for electricity or auto insurance and choose to keep their refrigerator running instead smells like a violation of citizens' 14th Amendment rights.

Posted by diegueno on May. 17, 2010 @ 12:08 pm

Get your facts right. Coby King is not Mercury's vice president. He works for a PR firm. If you can't be trusted to get even small details like this correct, what else are you getting wrong?

Posted by Guest on May. 26, 2010 @ 11:15 am

MERCURY IS THE WORST. This company is notorious for breaking the rules. You may pay a lower rate for your auto insurance, but if you are in an accident you experience the nightmare of being at odds with them to pay your claim. The lesson learned is that you don't know the quality of your insurance company until you have a claim and Mercury is not in the business of doing the right thing. Look for a more reputable company when buying insurance, you may spend a few more dollars up front but you most likley be treated as the enemy if you have a claim.

Posted by Guest on May. 30, 2010 @ 6:11 pm

I've had Mercury for over 15 years and every single claim has been handled properly. No games. No waiting around for an adjuster. Their partner body shops have all been first class, well respected repair shops. I have never had a problem getting my car fixed regardless of fault. Once a rock punctured my AC unit and they had it fixed in a day. No questions or second guessing the nature of the damage. Mercury is a great company.

Posted by Guest on Dec. 30, 2010 @ 4:16 pm