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California Voters to Decide If Insurers Can Review Coverage History

California voters will soon be casting their votes on Proposition 33 which is the only auto insurance initiative on the ballot this year.

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 following criteria:

  • 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 acceptable.

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 their support.

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.