Driving in circles

If approved in November, Proposition 33 would allow auto insurers to offer “loyalty discounts” to new customers who have had continuous coverage for the past five years.

Sound familiar?

It should. The initiative is a reincarnation of Proposition 17, which was shot down by a narrow margin in June 2010. It now rises from the dead, equipped with some changes that proponents hope will sway voters.

Opponents, meanwhile, argue that Prop. 33 is just like its predecessor and will negatively impact people who use public transit or bike, among other non-drivers. The measure would allow insurance companies to raise rates for people who have clean records but stopped driving at any time over the past five years.

The rewritten Prop. 33 does allow exemptions for military personnel, individuals who have been unemployed for up to 18 months and children living at home with their parents. And the initiative would provide currently uninsured drivers a discount proportional to the number of years they have had insurance in the previous five years.

“Proposition 33 … gives more power to the consumer with the power to shop for insurance companies,” spokeswoman Rachel Hooper explained, likening it to the ability to switch mobile-phone carriers.

As with its predecessor, 33’s main proponent is Mercury Insurance Group, whose founder, George Joseph, has personally provided more than $16 million to fund the proposition.

Going bumper to bumper against the initiative is California-based advocacy group Consumer Watchdog. The proposition will negatively affect millions of California drivers, said spokeswoman Carmen Balber.

In previous years, according to Balber, Mercury Insurance had illegally surcharged customers without prior coverage by 40 percent. Additionally, in states where Mercury had been legally allowed to add the surcharge, rates rose from 35 percent to more than 100 percent.

“We’re talking at least a 35- to 40-percent increase in insurance rates; in the standard family, that could easily increase rates by a thousand dollars a year or more,” Balber said.

The two opponents have been driving up each other’s walls since 1988 with the passage of Proposition 103, written by Consumer Watchdog founder Harvey Rosenfield.

Prop. 103 made illegal the practice of determining auto-insurance rates based on a person’s history of insurance. Before 103, insurance rates were set by companies without approval from an insurance commissioner.

“Proposition 33 is trying to make legal what is currently illegal: placing a surcharge on people who, under the current law, wouldn’t have had to pay extra,” said Balber. “If voted to pass this year, Proposition 33 would overturn the central protection that Proposition 103 provides.”

Mercury is currently the second-largest provider of car insurance in the state, and other providers are wary of their competitor’s actions.

“We believe in our own loyalty-discount program, which provides our customers with an incentive to continuously maintain coverage,” stated Sevag A. Sarkissian, spokesman for State Farm insurance, which has taken a middle-of-the-road position on the initiative. He added that if the proposition is passed, State Farm will analyze it to determine how it can be used to benefit the company’s customers.

Balber said this is a fight most insurance companies don’t want to take on. “This is a measure that [Mercury Insurance] has tried and has failed to pass for the last 10 years. If I were another insurance company, I wouldn’t want to throw my money away,” she said.

Though wording has been altered to address military personnel and the unemployed, opponents point out that many other populations would be negatively affected by the initiative’s passage. Those who consciously decide not to drive a car for five years would be ineligible, as would those who choose alternate forms of transportation, like riding a bike or taking public transit. Those who simply couldn’t afford a car would be punished, too.