New Insurance Ballot Initiatives on the Horizon in California
Insurance Law Flash
Auto Persistency Discounts – the ‘Mercury Initiative’
Proposition 17 will be on the June 2010 ballot. If adopted by the voters, Proposition 17 would expand the availability of “persistency” discounts for insureds that maintain continuous auto coverage. Currently, persistency discounts are permitted under Proposition 103 only for drivers who maintain coverage with the same carrier (or an affiliate). Proposition 17, drafted by Mercury Insurance Company, would allow auto insurers to provided persistency discounts to policyholders who move their coverage to a different company.
Proponents of Proposition 17 have filed a lawsuit challenging the “Argument Against” ballot statement by Proposition 103 author Harvey Rosenfield. The challenge to the “Argument Against” turns on whether the opponent’s attack on Proposition 17 focuses on discounts already permitted under current law rather than the expansion of the persistency discount that would be authorized by the proposition and, therefore, is false and misleading.
In addition, the California attorney general has filed a lawsuit to amend the wording of the ballot title of Proposition 17 previously approved by his office. The revised language states that Proposition 17 “will allow insurance companies to increase cost of insurance to drivers who do not have a history of continuous insurance coverage.” The language previously submitted by the attorney general to the secretary of state states: “May allow insurance companies to increase cost of insurance to drivers who do not qualify for discount.” Both lawsuits will be heard on March 12.
There is keen interest in Proposition 17 even among insurers that do not write private passenger auto insurance, as the June election will test whether voters are willing to amend Proposition 103.
The Consumer Watchdog Initiatives
Looking toward the November 2010 general election, Consumer Watchdog (the consumer group led by Rosenfield) is proposing two initiatives.
One of the Consumer Watchdog initiatives would limit the grounds for denying, non-renewing, or re-rating homeowners insurance. The initiative would significantly limit underwriting based on the claim history of the homeowner. New Insurance Code section 1861.17 would prohibit insurers from denying or non-renewing homeowner coverage or basing rates on a variety of claims-related factors. The prohibited factors include:
Claims where the risk of loss has been mitigated;
Claims arising from natural causes or fires starting on other property;
Filed claims that are not paid – including claims within deductible, claims that are not covered and claims paid under another policy;
Claims with respect to property not currently owned by the policyholder; and
Inquiries regarding the scope of coverage.
Residential insurance underwriting rules would have to be filed with the California Department of Insurance; public hearings on the underwriting rules would be held at the request of “any person.”
Consumer Watchdog is proposing a second initiative that would change the system for insurance broker compensation and rules for installment fees. Under this proposal, brokers that receive compensation from insurers would be prohibited from charging fees to consumers. In addition, the initiative would impose increased regulation of installment fees.
While the attorney general has approved ballot language for Consumer Watchdog’s initiatives, the organization has yet to submit petition signatures to the California secretary of state. Observers think that it is unlikely that Consumer Watchdog will be successful in getting either of its initiatives on the November ballot.