One of these non-required factors, now being applied in California by our Insurance Commissioner, allows your current insurance company to offer you a loyalty discount for maintaining your coverage with them. It does not allow other companies to offer you the same discount, and cherry-pick the most consistent insureds, which would offset the basic risk-spreading benefit of insurance.
On the other side of the same coin, current law does not allow your insurance company to charge you more than the approved rate just because you have not maintained continuous coverage with them, but must go only by the approved factors.
Finally, discounts given to any subset of their insureds by a company are required to be offset by rate hikes on those not getting the discount, in order to keep an appropriate pot from which to pay claims.
Prop 33 Is Deja Vu All Over Again
If you think you’ve seen this initiative before, it’s because you have, and not too long ago. The same backer, Mercury Insurance Company Chairman, George Joseph, put in most of the money supporting a similar proposition only two years ago. The voters defeated it, recognizing there must be something in this for Mercury Insurance for them to foot almost the entire bill. The same is true this year with Prop 33, for which Mr. Joseph has provided 99.5% of 16.7 million reported as spent on the initiative (it’s probably much more now).
The ad campaign features a young woman testifying that she is doing the right thing by carrying insurance and thinks companies should be able to compete for customers.
Unfortunately, the ad doesn’t reveal that the young woman is actually working for the Prop 33 campaign. It also doesn’t point out that a discount rate for those having continuous coverage and switching over means a hike in rates for current insureds who have had a lapse in coverage for any reason with three exceptions.
The exceptions are military service, loss of job (if the lapse was no more than 18 months….good luck in this job market) or a lapse for any other reason, lasting no more than 90 days in the last five years. About 20% of California’s insureds would presumably see their rates go up because they had a lapse in insurance that didn’t fit into any of these categories.
Sheila Kuehl’s Blog
Posted: Tuesday, 23 October 2012