Consumer Federation of California

A billionaire insurance executive is spending $8 million on a November ballot measure to undermine a key consumer protection that has saved California drivers more than $62 billion since 1988.

Common sense leads to one basic question: When has a billionaire insurance executive spent $8 million just to save drivers money?

The real aim of the ballot initiative, sponsored by Mercury Insurance Chairman George Joseph, is to increase premiums by as much as 40 percent for millions of Californians seeking new or renewed auto insurance. Those most affected include graduating students entering the workforce, Californians who previously used mass transit, and the long-term unemployed who are getting back to work.

Californians would be surcharged when a new job, move or some other circumstance required them to buy insurance again after not needing it for a time. This will cost good drivers as much as $1,000 a year or more just because they took a hiatus from driving an automobile

The fine print of this insurance executive’s initiative allows insurance companies to punish people for following the law. Insurers could hike premiums on formerly insured drivers who had been uninsured at some point in the past five years but had since bought insurance and started driving again. The consequence of such a surcharge will be more drivers falling back into the ranks of the uninsured, which will increase the cost of all other drivers’ "uninsured motorist" coverage.

Mercury’s chairman is using the citizens’ initiative process to gut a portion of California’s insurance consumer protection law, known as Proposition 103. It would legalize surcharges that were made illegal when voters enacted Prop. 103 in 1988 and barred insurance companies from considering a driver’s coverage history when he or she applies for insurance.

In other states, where insurance companies still use this pricing scheme, Mercury charges over 50 percent more for basic auto insurance if a customer did not have prior insurance, even if the reason was simply that he or she didn’t drive for a time or have a car.

For example, online Mercury quotes for Texans and Floridians who did not have insurance at the time of application are 51 percent and 55 percent higher, respectively, than for those who did. That’s the case even if they have a perfect driving record.

Joseph is mounting a rather lonely vendetta against Californians who passed this sensible consumer protection nearly 25 years ago. Aside from Joseph’s $8 million, there are few other donors backing this effort and 90 percent are Mercury agents.

This is not Mercury’s first attack. The company sponsored a nearly identical ballot initiative in 2010 and saw it go down to a grass-roots defeat despite its $16 million campaign.

The common sense here is pretty obvious. This ballot measure is a scam on voters to make insurance companies richer and to punch a hole in the best auto insurance consumer protections in the nation.