Two years ago, voters rejected an ill-conceived ballot measure that would have allowed auto insurers to offer discounts to people who had been covered by competing companies, but which would have done so at the expense of new drivers and those who had let their coverage lapse. Now, proponents of that measure are back with Proposition 33, a revised version that retains the fundamental flaws of the previous one. It was a bad idea two years ago; it's a bad idea now.
Under the framework established by Proposition 103 in 1988, insurers base their rates mainly on an applicant's driving record, the number of miles driven and the years of driving experience. The law allows the state insurance commissioner to approve additional discounts or surcharges only if companies can show a "substantial relationship" to the risk of loss. The point is to increase fairness by tying the rate a driver pays more closely to the risks he or she poses behind the wheel.
Proposition 33 would allow insurers to offer a "continuous coverage" discount without showing any relationship to risk. The markdowns would be offered to drivers who had been continuously insured for five years; those with fewer years of coverage would be eligible for partial discounts. Unlike the 2010 version, Proposition 33 would let military personnel on active duty and certain unemployed Californians qualify for the full discount even if their policies had lapsed.
Backers of the measure, which is funded primarily by Mercury Insurance founder George Joseph, have tried to confuse the public by claiming Proposition 33 would make loyalty discounts "portable." It wouldn't; it would create a new discount that wouldn't necessarily match a driver's current one. And because there's no relationship to risk, the discount would be equally available to bad drivers and good ones.
More important, state regulations would require insurers to offset the discount by imposing higher rates on new customers who were first-time drivers or who had let their coverage lapse for some reason — for example, because they didn't need a car or couldn't afford one. The increase would prompt more drivers of limited means to take to the road without insurance, probably raising the cost of uninsured motorist coverage for everyone else.