Backers of a proposed initiative that would change the rate-setting rules for auto insurance carriers said today that they have gathered 720,000 signatures to qualify the measure for the 2010 ballot.
"The Continuous Coverage Auto Insurance Discount Act" would extend companies' ability to use a driver's insurance coverage history to calculate rates. Current law allows companies offer a loyalty or "persistency" discount to drivers who have held continuous auto insurance coverage under their plan, but prohibits carriers from extending the premium to new customers who were previously covered by competing companies.
Proponents say the change would make the market more competitive by encouraging consumers to shop around and lower rates for responsible drivers who maintain coverage.
"All this measure does is allows people to take that discount that they're already getting and transfer that to a different company," said Kathy Fairbanks, a spokeswoman for the coalition backing the measure. "When you have all insurers able to offer all the same discounts, now you have more competition in the market. ... Competition is always a benefit for consumers."
The discount extension would not necessarily apply to drivers who had a lapse in coverage. That provision has prompted some consumer advocates to slam the measure as a "wolf in sheep's clothing" that would give companies more leeway in raising rates.
Doug Heller, a spokesperson for the Campaign for Consumer Rights, said that exception could result in companies levying steep surcharges on drivers who lacked insurance for more than 90 days over the last 5 years or whose plans were canceled because they missed a payment.
"This isn't about a discount or not getting a discount. If they're going to propose a discount for somebody, somebody else has to pay for it," he said.
"Why should people in this economy, who may have stopped driving for a time until they got back on their feet, face a huge penalty when they go back to get auto insurance again? It's a bad idea with really bad timing," Heller added.
Fairbanks countered that because an estimated 80 percent of insured drivers maintain continuous coverage and are already eligible for the discount, companies would not need to raise fees elsewhere to offset the rate cuts.
The measure is backed by Mercury Insurance, which has already invested more than $4.5 million to qualify the measure for the ballot, including a $1 million contribution reported Friday to the Secretary of State.
The initiative backers must submit 433,971 valid voter signatures to qualify the measure for the ballot. Proponents are hoping the signatures will be verified by the end of next month, to ensure the measure goes to voters in the June statewide primary.
Click here to read the language of the ballot measure.
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