Initiative to Expand California Prop 103 Ignites Battle

A ballot initiative to expand the scope of California’s Proposition 103 to include health insurance could also impact the auto insurance industry by challenging a long-sought-after initiative on auto insurance discounts for persistency, industry watchers say.

Santa Monica, Calif.-based advocacy group Consumer Watchdog, which filed the Insurance Rate Public Justification and Accountability Act, must get 500,000 signatures to qualify it for the Nov. 6, 2012, ballot. If successful, the health insurance rate initiative could be placed on the same ballot as the 2012 Auto Insurance Discount Act, which is near to qualifying for that ballot.

Either initiative would expand Prop 103. Prior to the passage of Prop 103 in 1988, insurance companies were not required to file rates for approval except for health and life, and the state was considered an “open competition” state in which competition regulated the marketplace.

A major provision of Prop 103 dealt with personal automobile insurance, and it prevented rates from being determined based on a person’s history of insurance.

Consumer Watchdog says its initiative would “ensure fair and transparent rates for health, home and auto insurance.” But, the proposed act’s language prohibits “unfair pricing” not only for health, but for auto and home insurance based on prior coverage and credit history.

“Basically it goes to the heart of the persistency initiative that’s being circulated,” said John Norwood, the managing partner of Norwood & Associates who serves as a legislative advocate for Insurance Brokers & Agents of the West.

The 2012 Auto Insurance Discount Act is being sponsored by the American Agents Alliance, which says it “will allow consumers to receive a discount for their years of continuous automobile coverage regardless of the company where they seek insurance.”

The persistency initiative is similar to Proposition 17 on California’s ballot in 2010 sponsored largely by Mercury General Corp., which was narrowly defeated, 52 percent to 48 percent.

The latest persistency initiative is being supported by Mercury’s chairman, George Joseph, but not by Mercury this time, said Joseph, who called the initiative he’s backing “pro consumer” because it would allow portable persistency as opposed to the singular choice of loyalty programs that lock consumers into one carrier.

Topics California Auto