Despite Prop. 17’s defeat, auto insurers’ battle may not be over


A $16-million effort by auto insurers to ease regulations may not be over despite state voters’ decision to reject Proposition 17, which would have allowed drivers to take their continuous-coverage discount with them if they switched carriers.

By the time all votes were counted early Wednesday, voters defeated the initiative 52% to 48%, despite lopsided campaign funding that allowed insurance industry supporters to outspend opponents 12 to 1.

The hard-fought battle was waged between consumer advocates, who said the measure would increase premiums, and insurers, led by Mercury Group, which contended in an advertising blitz that the proposition would cut rates.

Consumer Watchdog of Santa Monica hailed the measure’s defeat as a sign that voters are wary of letting big business intrude into the citizen initiative process that allowed the proponents to get the issue on the ballot.

But spokesmen for Californians for Fair Auto Insurance Rates, the Yes on 17 campaign, said they were disappointed and signaled that they might carry on the fight for regulation revisions they expect to bring more business their way.

Mercury Chairman George Joseph, who for years has been struggling to get the changes through the Legislature and survive court challenges, says he’s not sure what his next step might be.

“We have to convince people … that this is a good thing for consumers. I don’t think we made this clear enough,” Joseph said, repeating the campaign’s message that more than 80% of insured motorists would benefit from being allowed to take their loyalty discounts with them to a new insurer.

Mercury provided the vast majority of the Yes on 17 funding, used to bombard drivers with the message that passage would correct “a flaw in the law” and spur more competition among insurers.

Proponents failed in their attempt “to scam California drivers by authorizing surcharges that voters made illegal in 1988 when they passed Proposition 103,” said Harvey Rosenfield, founder of Consumer Watchdog and author of the ballot measure that has regulated car insurance rates for 22 years.

“This is a victory not just for motorists in California, but a broader victory for California voters, who have made it clear they don’t intend to let insurance companies or utility companies or other big corporations subvert the people’s initiative process,” Rosenfield said.

The Campaign for Consumer Rights spent about $1.3 million to urge voters to reject the Mercury-backed measure.

The campaign warned voters that passage would eventually raise rates for new drivers, military personnel serving out of state and anyone who quit driving for a while to save money or take public transpiration.

Opponents also contended the threat of higher rates for those already paying top dollar for car insurance could lead to more uninsured drivers on the state’s roads.

Coupled with defeat of Proposition 16, a measure backed by Pacific Gas & Electric Co., which would have required voter approval before cities could get into the electricity business, voters sent a strong message that their voice in the political process cannot be bought, Rosenfield said.

The insurance industry backers stood their ground despite Proposition 17’s failure.

“Voters missed an opportunity to extend an auto insurance discount that could have lowered auto insurance rates for millions of drivers,” said Mike D’Arelli, executive director of the Alliance of Insurance Agents & Brokers that backed the initiative.

“There is no doubt that extending the continuous coverage discount would have improved current auto law for consumers,” he said.

Kathy Fairbanks of the Yes on 17 campaign described its defeat as “a Pyrrhic victory” for opponents because they are being investigated by the Fair Political Practices Commission for what she said was an attempt to hide the source of $590,000 in contributions to the StopProp17 campaign.

Rosenfield dismissed the failed sponsors’ report of campaign finance irregularities as sour grapes and said his campaign would welcome the commission’s review because they have scrupulously complied with campaign laws.

Marc Lifsher in Sacramento contributed to this report.