Car Insurance Discount Defeated in Committee

Legislation that would allow automobile insurers to offer discounts to customers who have continuously purchased insurance was defeated in a key Senate committee Wednesday.

The measure, AB 1488, fell one short of the five votes it needed to win approval in the nine-member Senate Insurance Committee. Chairwoman Jackie Speier (D-Hillsborough) said it is not likely to be acted on again.

It was a severe setback for Mercury Insurance Group, a Los Angeles-based company that had sponsored the measure in the hope of short-circuiting Insurance Commissioner Harry Low’s plan to prohibit the discount.

Mercury had given campaign contributions to seven of the committee members, with some coming just days before the panel was to consider the legislation.

Company representatives argued that the discount was a boon for consumers because it allowed them to shop for the best rate and still get a discount for having maintained insurance coverage. Under Low’s regulation, companies would be able to offer a “loyalty discount” only to customers who stayed with the same company.

But Mark Savage, an attorney representing Consumers Union and the Southern Christian Leadership Conference of Greater Los Angeles, said for longtime customers to get the discount proposed by Mercury, new purchasers of insurance would have to pay higher rates to make up the difference.

He said the higher rates would fall disproportionately on the poor, many of whom are buying coverage for the first time in order to comply with the state’s mandatory insurance law.

Speier, who voted against the bill, said both types of discounts--the one for loyalty and the one for maintaining coverage--were unfair because customers who didn’t quality for the break had to pay higher rates.

“I think the whole concept is problematic,” she said.

Among those supporting the bill was Sen. Don Perata (D-Alameda), who received a $25,000 contribution from Mercury shortly before the first hearing on the bill June 26. He said he favored the legislation because it would give working-class people in his district a greater ability to shop around for the lowest insurance rates. Perata said the contribution from Mercury did not influence his position.

Others who voted for the bill included Sens. Ross Johnson (R-Irvine) and Nell Soto (D-Pomona), who each received $3,000 from Mercury. But Sens. Martha Escutia (D-Whittier) and Liz Figueroa (D-Fremont), who also received $3,000, voted against the measure.

Sen. Jack Scott (D-Altadena), who collected $3,000, and Sen. Bill Morrow (R-Oceanside), who got $1,000, were not present for the voting.