California voters will soon be casting their votes on
Proposition 33 which is the only auto insurance initiative on the ballot this
The purpose of Prop 33 is as follows, “Changes current law
to allow insurance companies to set prices based on whether the driver
previously carried auto insurance with any insurance company, allows
proportional discounts for drivers with some prior coverage [and] allows
increased cost for drivers without history of continuous coverage.”
Basically this means that California auto insurers will be
able to look at the coverage history of potential customers for the past five
years. The law requires insurers to overlook any lapse if they meet the
- The lapse was less than 90 days.
- The lapse was up to 18 months if the driver
dropped insurance coverage due to being laid off.
- The lapse can be up to any amount of time if it
was due to active military service.
California’s auto insurance industry is mainly governed by
Proposition 103 which was passed in 1988. Prop 103 sets up 19 factors that
insurers are allowed to use to rate policyholders. If it passes, Prop 33 would
be the first change to those factors. Currently insurers are not allowed to
look at previous coverage.
Proponents claims that allowing insurers to review coverage
history will allow them to better rate a potential customer and assess risk as
well as set more accurate premiums. Opponents argue that drivers drop insurance
coverage for all kinds of legitimate reasons and good drivers will end paying more
and lose valuable discounts.
A History of Prop 33
There has been a battle over Prop 33 that has gone on for
years. It sprung from the ashes of Proposition 17, which was defeated, by a
narrow margin in 2010. Proposition 33 is
hoping to establish the same cross-insurer discounts as Prop 17 while beefing
up the provisions for military members. This has moved USAA, a big service
member insurer to support Prop 33.
Opponents argue that claims of Prop 33 being pro-consumer
are actually misleading. Consumer Watchdog points out that there are numerous
reasons that a driver might drop coverage and if Proposition 33 passes, many
drivers could face higher insurance rates. They claim that it punishes
otherwise good drivers simply because they did not continuously hold coverage.
Proposition 33 has already been in court. In August,
supporters sued election officials over wording and came up against Consumer
Watchdog lawyers. The state Superior Court ruled that the ballot language was
Proposition 33 has led to high profile arguing both over the
airwaves and in legislative hearings with Consumer Watchdog on one side and
Mercury Insurance on the other.
The Fighting Continues
Even as Election Day closes in, the arguing continues. The
National Organization of Women (NOW) recently released a statement against
Proposition 33 saying that much of its opposition relates to the authors and
the support of Mercury Insurance and its Chairman George
Joseph. NOW claims that George Joseph is personally funding Prop 33 to
the tune of $16.4 million so his company will benefit.”
Supporters are continuing their fight as well. Veterans and
veterans groups have gathered to support the measure. They claim that maintaining
insurance discounts for service members that are deployed is a key reason for
Proposition 33 would allow insurers to review coverage
history when considering new customers and setting rates. It would allow exceptions
for certain situations but opponents are concerned that drivers who allowed
coverage to lapse for legitimate reasons would lose discounts, pay higher
premiums or be unable to get coverage at all.