(February 18, 2010) A California Chamber of Commerce-supported measure that will lower auto insurance rates and increase competition in the auto insurance market will appear on the June ballot as Proposition 17.
Proposition 17 fixes an inconsistency in auto insurance law and will ensure California drivers who continually maintain auto insurance qualify for the “continuous coverage discount,” even if they switch insurance companies.
Under current law, insurance companies are allowed to offer a discount to customers who maintain continuous coverage. An inconsistency in current law, however, prohibits drivers from taking their continuous coverage discount with them if they change insurance carriers.
This inconsistency penalizes more than 80 percent of drivers who purchase auto insurance coverage as required by California law.
Competitive Market
Proposition 17, the Continuous Coverage Auto Insurance Discount Act, makes the already-existing discount portable even if motorists change insurance companies, rewarding responsible drivers and promoting competition and lower rates by encouraging consumers to shop around when purchasing insurance.
“Changing the law to allow insurance companies to offer the same discounts to new and existing customers will make the auto insurance market more competitive,” said Jim Conran, president of Consumers First and former director of the California Department of Consumer Affairs. “If auto insurers want to attract new customers and keep their existing ones, they will have to offer lower prices, better plans and better service.”
Who Benefits?
Small businesses that buy auto policies through personal lines of insurance and consumers will benefit from the passage of Proposition 17.
The measure does not change the primary factors that determine a person’s auto insurance rates under California law. Insurance companies still will be required to base auto insurance rates primarily on driving safety records, miles driven annually and driving experience. Other discounts, like the good driver or student discount, will remain in place.
“Disappointingly, there are a few who are trying to defeat this pro-consumer measure,” Conran said. “Recognizing the uphill battle before them, they have attempted to cloud the issue by implying this very simple measure will cause massive upheaval in the market and have an adverse effect on some consumers.
“The fact is that no one will be made worse off under Proposition 17 than under current law. The only difference is that the 82 percent of consumers who currently qualify for this discount will be able to take it with them if they want to switch insurance companies.”
Consumer Options
If Proposition 17 passes, customers would be free to shop around and shift from one insurance company to another without losing their continuous coverage discount.
Under current law, consumers are punished for switching auto insurance companies. Under Proposition 17, they would be free to keep their continuous coverage discount and seek additional savings.
“Much also has been made of the fact that the initiative is being spearheaded by Mercury Insurance,” Conran said. “Clearly, Mercury wants to offer this discount to lure new customers and increase its business in California. But the only way it—or any insurer—can gain market share is by offering better rates or plans than the competition.
“That, of course, means consumers will have more options and lower prices. That’s a very clear benefit and one that deserves voter support.”
Action Needed
The CalChamber is encouraging local chambers of commerce and businesses to join the other business, consumer and taxpayer groups in support of Proposition 17, the Continuous Coverage Auto Insurance Discount Act, on the June ballot.
For more information, or to sign up in support of Proposition 17, visit www.YesProp17.org.