The Times’ editorial board came out in opposition to Proposition 17, a measure on the June ballot that would enable a new “continuity” discount for drivers who switch insurance companies. It’s a variation on the current loyalty discounts that insurers can offer to encourage drivers to renew their policies. The primary backer of Proposition 17, Mercury Insurance, argues that the loyalty discounts deter competition by discouraging people from changing insurers, and that adding a continuity discount would remedy that problem. The editorial counters that Proposition 17 is based on flawed logic and runs counter to the spirit of Proposition 103 — a 1988 initiative that tied auto insurance rates more closely to a driver’s record.

The editorial states that Proposition 17 would allow insurers “to offer lower premiums to drivers who maintained insurance for at least five years with any company.” But a spokeswoman for the Mercury-funded group Californians for Fair Auto Insurance Rates, which is running the campaign in favor of the ballot measure, disputed that, saying insurers would be able to offer the continuity discount to drivers who’d maintained insurance for a significantly shorter period of time — as short as six months, in fact.

The measure wouldn’t affect loyalty discounts, which companies usually offer to drivers who’ve been customers for much less than five years. But Proposition 17’s language on the continuity discount isn’t clear as to when it would kick in. Here are the relevant portions of the text:

[A]n insurer may offer applicants or insureds an additional discount … based on the length of time the applicant or insured has been continuously insured for bodily injury liability coverage … with one or more insurers, affiliated or not.The insurer may consider the years of continuous coverage preceding the policy effective or renewal date. This discount is called a continuity discount. Children residing with a parent may be provided the same discount based on their parents’ eligibility for a continuity discount….

Continuity of coverage shall be deemed to exist even if there is a lapse of coverage due to an applicant’s or insured’s absence from the United States while in military service, or if an applicant’s or insured’s coverage has lapsed for up to 90 days in the last five years for any reason other than nonpayment of premium. This subdivision does not limit an insurer’s ability to offer additional grace periods for lapses.

Consumer Watchdog’s Harvey Rosenfield, a leading opponent of Proposition 17 (not surprisingly, given that he wrote Proposition 103), said the only logical interpretation of the “deemed to exist” clause is that a driver must have five years of nearly uninterrupted coverage before becoming eligible for the continuity discount. But what about new drivers who’ve spent four years or less behind the wheel? You wouldn’t say their coverage “lapsed” before they started driving, would you? On the other hand, if insurers provide a grace period for them, shouldn’t they also offer the new discount to anyone who resumes driving after an extended period spent relying on mass transit? Wouldn’t they pose a lower risk than a new driver? And why should inexperienced young drivers qualify for the discount simply because they’re living with a parent who does?

Clearly, the eligibility issue isn’t as clear-cut as the editorial suggested, but it doesn’t seem as simple as proponents claim either. That’s not necessarily a reason to vote against Proposition 17, but it does raise questions about who would benefit from it. It also clouds the issue of who stands to pay more if the proposition becomes law. Just as with all current discounts, insurers would have to offset the projected revenue loss from the continuity discount with a new surcharge on customers who don’t qualify for it.

Proposition 17, which will appear on the June ballot in California, could result in big changes for purchasers of car insurance in California. The proposition was written and funded by Mercury Insurance, California’s fourth-largest auto insurance company.

The proposition would allow auto insurance companies to charge customers more if they have never previously been insured. Proposition 17 also penalizes drivers who dropped coverage for more than 90 days over the last five years (with an exception for overseas military personnel) or who missed one insurance payment.  Those who stopped driving and didn’t need insurance would be required to pay up to $1,000 more for car insurance when they restarted coverage. Current California law prevents that surcharge.

Those drivers who did maintain continuous auto insurance would be eligible for a continuous coverage discount, which they could keep if they changed insurance companies. Under current California law, drivers who switch insurance companies cannot receive the continuous coverage discount.

This is bad for consumers. My general rule is that if the insurance companies are spending millions on a ballot initiative, and Mercury is, then this is only good for them. Additionally, the insurance companies are trying to undermine the authority of the insurance commissioner. While I do not think the insurance commissioner should be an elected office, at least for now consumers get to have some say in who will protect them from the insurance companies. I am urging everyone to vote no on Prop. 17.

Jerry Brown tried to shake up the California Governor’s race by demanding debates with all the major candidates today, but at the same time responded to criticism for not being specific enough on the major issues facing California by talking about federal issues not under the gubernatorial purview and declining to give a position on the upcoming June ballot measures.

“I am not prepared to issue positions” on ballot measures like Prop. 17, the Mercury Insurance measure that would allow auto insurers to jack up rates for individuals if there is a lapse in their coverage, said Brown, the former Governor and current Attorney General, at a post-speech press conference. When asked again about specifically what he would do to bring jobs to the state, he cited getting banks to lend to small businesses. When told that was a federal issue, Brown said “I am a citizen of the Republic.” Pressed further, Brown said that he wold not favor new taxes unless people “want them and vote for them,” which he said was a “tough thing to say in front of this crowd.” He actually didn’t say it in his speech. He also proposed moving authority on local spending issues back to local control, decentralizing the state budget structure to a degree.

Brown said that people aren’t paying attention to the race and that “we will be more than competitive” on television in the fall. He suggested that people “will have all the information they need” to make their decision in November, and that “people will recoil from all the information” that they’ll have, an allusion to Meg Whitman’s prodigious spending. When asked why then he would call for more information through debates, Brown said they would be more substantive and of interest.

Brown didn’t seem terribly hopeful that Whitman or Poizner would actually accept the challenge. Asked if it was more likely that Whitman would release her tax return or agree to the debate, Brown said, “It’s a close question.” However, he added, “I wouldn’t have made the challenge if I didn’t entertain the possibility that they’d accept it,” and hoped it would “rise to the ministerial level” of negotiations between all the campaigns. “The Sherpas will meet next week.”

Certainly, the gubernatorial campaign won’t be dull.

No word on whether Peter Schurman, the former executive director of MoveOn.org who is running to the left of Brown in the Democratic primary on a platform of single payer health care and changing the 2/3 requirement for budget and taxes, would be allowed to participate in these debates. I’m guessing no.

Enron, Goldman Sachs, Halliburton, Monsanto, Blackwater, Bank of America, Citigroup, Cigna, Aetna, Enron, Arthur Andersen, Mercury Insurance, Philip Morris… These are just a few corporate names that engender feelings of distrust, anger and betrayal. They represent scandals, greed, blatant disregard for public welfare, lavish spending of taxpayer money and other negatives, and serve as reminders about how corporate wrongdoing has brought shame on our country and harmed millions.

But as the public grows more distrustful of big corporations, corporations are fighting back by evolving more clever and sophisticated forms of public relations. Their goal? To manipulate public attitudes and assure that widespread negative feelings don’t block their ability to do business. Increasingly, corporations are engaging in variations on the theme of “corporate social responsibility,” to try and persuade us that they can be trusted again.

California Insurance Commissioner Steve Poizner announced this week that Mercury Insurance “may have illegally overcharged thousands of Californians for auto and homeowners insurance,” according to a statement from his office.

An “examination” of the company found that it was sometimes raising rates on drivers who had accidents, even though the collisions weren’t their fault, and that it was excluding some bartenders, liquor store owners, painters, cocktail waitress and waiters and artists from coverage.

Mercury was quick to point out, however, that Poizner is seeking the Republican nomination for California governor. The company stated that “political interests” were at play in Monday afternoon’s big announcement.

Even Poizner’s own spokesman acknowledged that making such a big announcement about such violations was unusual. But Poizner’s office argues that the company has repeated violations it had previously agreed to fix.

Mercury is the $3.5 million main backer of Prop. 17, a November ballot initiative that would allow transferable “loyalty discounts” for drivers who change carriers. But the rates would not apply to those who let their insurance lapse, therefore becoming a clever way to raise rates on some drivers, critics say.

Poizner’s office stated that Mercury could face $5,000 fines for each violation it found.

As the insurance behemoth bankrolls Prop 17 on the June ballot, the company is finding their way into the news by another another route.

“An examination done by the Department of Insurance appears to show that Mercury Insurance has disregarded California’s consumer protection statutes and overcharged consumers,” Insurance Commissioner Steve Poizner said yesterday. “In addition, the Department’s examination finds that Mercury Insurance has apparently continued to violate the law despite agreements with the state to terminate its illegal behavior.”

Various allegation are being thrown at the company, including barring bartenders, liqour store owners, painters, cocktail waitresses, waiters and artists. The company also still hasn’t corrected violations made in 1998 and 2002, according to Poizner. Ouch.

This Wednesday morning, two legislative committees will hold a joint hearing on Proposition 17, funded by Mercury Insurance. But it looks like Mercury’s Chairman George Joseph is not going to bother showing up for it.

The founder of Consumer Watchdog, Harvey Rosenfield, has challenged Joseph to attend the hearing in Sacramento to publicly defend his ballot initiative. Prop 17, which would allow insurance companies to raise premiums on drivers based on their history of buying auto insurance, is 99% funded by Mercury and a particular focus of Joseph’s decades long effort to evade accountability to consumers

Joseph has already spent $3.5 million on Prop 17 to advance his greedy cause. So what’s up George, why won’t you put your mouth where your money is?

Harvey Rosenfield wrote to Joseph late last week urging him to stop hiding behind his public relations flacks, front groups and radio ads and attend the hearing of the California Assembly Insurance Committee and Senate Banking, Finance and Insurance Committee to explain why voters in California should trust Mercury Insurance and its quest to enact Prop 17. In his letter to Joseph, Rosenfield points out that the insurance executive has privately defended his initiative in recent calls to several people who have spoken out against Prop 17. Now Joseph has an obligation to come forward and publicly defend this culmination of a decade-long attack on state consumer protections. Rosenfield writes:

The time has come for you to stop hiding behind your paid surrogates and defend your Captain Ahab-like quest to surcharge and discriminate against motorists before the public…This is not like one of those legislative hearings where you can do your dirty work through lobbyists and donations to the politicians. Will you be there to defend publicly what you are saying privately, or will it be another one of your flunkies who does your bidding? I’ll be waiting to see if you have the courage to face me and our publicly elected officials. If you don’t, sir, you have no business sponsoring a ballot measure in this state.

In the letter, Rosenfield notes state agency reports on Mercury’s history of discrimination, fines by state regulators and that Mercury ranks at the bottom of the most recent JD Power customer satisfaction survey: 27th of 32 large auto insurers.

Proposition 17 would create an insurance surcharge on drivers, including soldiers and seniors, who have had a lapse in car insurance coverage for virtually any reason during the past five years, or who missed a payment. Under the measure, people who stopped driving and didn’t need insurance for a time would be required to pay up to a $1000 more for car insurance when they sought to restart coverage. Currently, insurance companies are prohibited from imposing the surcharge in California. The initiative is opposed by consumer and citizen groups including Consumers Union, Consumer Watchdog, Consumer Federation of California, California Alliance of Retired Americans and VoteVets.org.

We were wondering if Joseph was going to step up after reading the letter, so earlier today I called Coby King, who serves as Mercury’s communications director, to ask if Joseph would be flying to Sacramento – but alas, no response.

More information at: StopProp17.org.

The official ballot materials written by the Attorney General are going to tell voters that Mercury’s Prop 17 will allow auto insurance companies to raise premiums for many motorists.

You can read our press release here or the Los Angeles Times coverage here.

Mercury’s legal attack shows it is willing to stop at nothing to deceive Californians about Prop 17, which will raise premiums on millions of Californians by as much as $1,000 per year, or possibly even more. Members of the military, students and others who stop driving for good reason will be unfairly punished.

Now we need to get these facts out to the voters. Please contribute as much as you can to help us win this just fight.

Thanks for all your support.

Harvey Rosenfield

Consumer Watchdog Founder

Have you ever had a lapse in auto insurance coverage for any reason? Tell us your story.

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Posted by Marisa Lagos – SFGate.com Politics Blog

Looks like the California Attorney General’s office agrees with itself.

In advance of a court hearing Friday, where a judge will hear arguments over ballot language for Proposition 17, the AG’s office filed a brief essentially defending its decision last month to change the measure’s ballot summary.

A little background: Proposition 17, backed by Mercury Insurance Group, is on the June ballot. The measure would change the state law that governs insurance rates by allowing companies to consider a drivers’ coverage history when they sign up (currently, continuous coverage rates — i.e., discounts for maintaining insurance — only apply while you stay at the same company). And that’s where the problem lies.

Backers say the change will encourage competition by letting drivers shop around more, and that current, voter-approved laws punish good drivers who want to change insurers.

Opponents charge that it’s a veiled attempt to hike up rates for thousands of drivers, including servicemen and women, who had a lapse in their insurance for any reason. And, they argue, it will let insurers impose surcharges that are outlawed under Proposition 103, the 1988 landmark car insurance measure approved by voters. After they accused Attorney General Jerry Brown of caving to the huge insurance company — a contributor to his gubernatorial run — Brown’s office changed the ballot summary to include this sentence:

“Will allow insurance companies to increase cost of insurance to drivers who do not have a history of insurance coverage.”

(An aside: that story we linked to above, by colleague Carla Marinucci, set off a whole different drama over Brown’s spokesman taping phone calls with reporters, which led to an investigation and that spokesman resigning.)

Mercury objected in court, and now we have tomorrow’s court hearing.

In that brief filed by the Attorney General’s office, the state argues that the proponents don’t think the ballot summary is untrue, but should be stricken because the cost of insurance are the function of rates set by the Insurance Commissioner, and that Prop. 17 doesn’t actually contain any language about rate setting.

“The fact of the matter is that if Proposition 17 passes, insurance companies will be allowed to do two key things: (1) lower the cost of insurance to drivers who qualify for the new discount; and (2) increase the cost of insurance for drivers who do not qualify for the new discount. Thus, voters would be misled if the title and summary mentioned only the new discount but not the corresponding surcharge,” the brief reads.

Voters, the AG’s office argues, would be misled into thinking the measure is just about offering a discount without that key sentence.

The Prop. 17 campaign calls the measure “common sense” and said in a news release today that opponents are “intentionally misleading voters.”

Whew. Friday’s hearing should be fun. But first, we need a nap.