CAMPAIGN FOR CONSUMER RIGHTS NEWS

December 16, 2009
Contact: Naomi Seligman (310) 392-0522 ext. 318

Mercury Insurance Submits Initiative Signatures To Trick Voters Into Paying Higher Auto Insurance Premiums

Campaign for Consumer Rights Warns Soldiers, Seniors and other Californians Would Be Penalized For Having a Lapse in Insurance Coverage, Even If They Weren't Driving

Santa Monica, CA — Auto Insurance giant Mercury Insurance is submitting signatures this week to place its deceptive initiative on the California ballot in 2010. The measure would surcharge drivers, including soldiers and seniors, who have had a lapse in car insurance coverage for virtually any reason during the past five years. Under the proposal, people who stopped driving and didn't need insurance for a time would be required to pay hundreds of dollars more for insurance when they sought to restart coverage. The measure would gut a provision of the 1988 insurance reform measure Prop. 103, which prohibits companies from raising rates on people because they did not have auto insurance in the past.

“Mercury’s initiative is an insurance industry trick to legalize surcharges and it will lead to higher rates for all Californians,” said consumer advocate Harvey Rosenfield, who authored Proposition 103.

Soldiers, Seniors and Families Struggling with Recession Face Massive Rate Hikes

“Penalizing troops with higher rates while in service to their country is beyond the pale. I don't understand why an insurance company should be allowed to charge service members higher auto insurance premiums just because they may have decided that they didn't need a car while living on base," said Jon Soltz, Chairman of VoteVets.org and an Iraq War veteran. "There’s something wrong with an initiative on the ballot that says that it’s ok to surcharge our troops and I hope Californians feel the same way.”

The Mercury initiative would allow insurance companies to penalize drivers who, for virtually any reason, had a lapse in auto insurance in the five years prior to applying for coverage, or were canceled for missing one payment. The penalty, which would amount to hundreds of dollars, would be imposed whether or not the person was driving during the lapse in coverage.

  • A senior citizen who stops driving for several months after surgery would be penalized when she tries to restart insurance coverage.
  • A soldier serving on base in the United States would be penalized when he returns to civilian life in California and needs auto insurance again.
  • A family whose coverage was canceled after missing just one auto insurance payment would be penalized even if they tried to restart coverage immediately after they were canceled.
  • Anyone who gives up driving for public transportation or to bike to work would be penalized when they need a car and insurance again.
When millions of Californians are penalized when they try to buy auto insurance, the number of uninsured motorists on California roads will go up and everyone’s premiums will increase as a result.

In pressing for this initiative, Mercury is launching a deceptive campaign meant to hide the proposal's inherent attack on families struggling in these tough times. When the California Court of Appeal invalidated a virtually identical 2003 Mercury-sponsored law, the Court, citing the Department of Insurance's senior actuary, ruled that Mercury's proposal “would result in a surcharge equal to a 40 percent increase in premium for…policyholders who do not qualify for the 'continuous insurance' discount.”

Mercury Insurance is the Sole Funder of Initiative but is Hiding Behind a Front Group.

The proposed initiative is solely funded by Mercury Insurance, California's third largest auto insurer, which has provided $4.5 million to the campaign to date. Mercury has set up a front group, Californians for Fair Auto Insurance Rates or CAL-FAIR, in an effort to ensure that the news media have no access to Mercury's CEO Gabe Tirador and its billionaire Chairman George Joseph. Mercury's executives cannot honestly explain their initiative without acknowledging that millions of Californians will pay higher premiums if it passes, so they have set up a firewall to deflect any questions towards their public relations consultants.

“When Mercury insurance spends millions of dollars to change California law, you can be sure their proposal is not in the consumer’s best interests,” said Douglas Heller with The Campaign for Consumer Rights, which is working with a coalition of groups to oppose the Mercury initiative. “Mercury insurance has a long history of lying to voters, regulators and the courts and will spend tens of millions of dollars in this effort to trick voters into paying more for car insurance.”

In fact, The CA Department of Insurance described Mercury Insurance as an abusive anti-consumer company, in an official filing made in a Department action against the company earlier this year. The Department wrote:

“Mercury's lengthy history of serious misconduct, and its attitude - contempt towards and/or abuse of its customers, the Commissioner, its competition, and the Superior Court - are all relevant to determining the penalty needed to best ensure the protection of the public from future violations and wrongdoing...

“Among Department [of Insurance] staff, consumer attorneys, and consumer victims of its bad faith, Mercury has a deserved reputation for abusing its customers and intentionally violating the law with arrogance and indifference.”

A copy of the Department filing can be found here. (See page four, in particular.)

The Campaign for Consumer Rights, a nonpartisan, nonprofit organization is working with consumer groups, seniors, unions and businesses to oppose Mercury's deceptive initiative. Campaign for Consumer Rights is the campaign affiliate of the nonpartisan, nonprofit Consumer Watchdog.

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