George Joseph must think that the old saw defining insanity as doing the same thing over and over and expecting a different result doesn’t apply to him — or at least that it’s amenable to tweaking.
Joseph, the billionaire nonagenarian founder and still kingpin of the insurance company Mercury General Group, is represented on November’s statewide ballot as the promoter and virtually sole bankroller of Proposition 33. This initiative would allow auto insurers to offer discounts to drivers who have maintained coverage without a break, which is known as “persistency.”
That sounds innocent — what ballot proposition doesn’t? But it’s a significant change in the law, which currently allows auto insurers to offer such discounts only to customers who have maintained unbroken coverage with their current carrier, not with others. The difference means, in effect, that insurers would be able to charge higher rates for new customers without prior insurance; that’s explicitly barred by the 1988 insurance reform measure Proposition 103, which has led to sharp reductions in California auto insurance premiums overall.
By making auto insurance more expensive for exactly the people who should be encouraged to buy it — young and low-income drivers — Proposition 33 would drive up the number of uninsured drivers on California roads. That isn’t good for anybody.
The new measure is pretty much the same as Proposition 17, which was narrowly defeated in the June 2010 statewide election. Proposition 17 was backed almost exclusively by Mercury General, which is the state’s fourth-largest auto insurer. This time around Joseph, Mercury’s chairman, has personally contributed $16 million thus far to the campaign, or roughly 98% of its funds. The opposition campaign, which is mostly the Consumer Watchdog organization co-founded by consumer advocate Harvey Rosenfield — the author of Proposition 103 — has raised about $200,000 in cash and in-kind contributions.
A disclosure: I’ve been a Mercury policyholder for more than 15 years, and my experience with the company has been good. But my regard for Mercury stops with Proposition 33.
One reason lies in the disconnect between what the initiative campaign says is its goal and what Joseph told me is his rationale. The campaign says its aim is to “insure more Californians” by encouraging “those who don’t have car insurance to obtain it.” Joseph, however, made clear during a lengthy chat we had last week that he sees Proposition 33 as a tool for poaching customers from his competitors.
“If I can give a new customer the same discount he’s getting at State Farm or Farmers,” he says, “I’m perfectly happy to compete.”
Joseph also says he could give bigger discounts to his existing customers “if I could charge new people the proper rate.” He made no bones about the fact that the “proper rate” for customers coming to Mercury as newly insured policyholders is much higher than what he can charge them now.
So much for insuring more California drivers, too many of whom, possibly millions, already find coverage so costly that they’re willing to risk running afoul of the state’s mandatory insurance law.
The real target of Proposition 33 is Proposition 103, which is one of the most successful consumer-protection measures ever. From its enactment through 2005, according to a survey by the Consumer Federation of America, auto insurance rates in California dropped from the third costliest in the country to 18th.
Proposition 103 barred the basing of auto rates on anything other than a driver’s safety record, years of driving experience and miles driven annually. It allowed other factors that could be shown to have a substantial relationship to the risk of loss, including a driver’s longevity with his or her current carrier.
Joseph has had the gutting knife out for years for Proposition 103’s “persistency” rule. Bills to overturn the rule were passed by the California Legislature in 2002, after Mercury donated to the campaigns of 70 of the 120 state legislators, and in 2003, after the company distributed donations to 91 of the solons.
Then-Gov. Gray Davis vetoed the 2002 measure, but the following year, when he was fighting for his life in the recall, Mercury donated $175,000 to his campaign. Davis signed the 2003 bill. The state Court of Appeal tossed out the measure in 2005 as an infringement of Proposition 103. Joseph returned to the field in 2010 with Proposition 17, which lost 48% to 52%.
Joseph isn’t the only millionaire or billionaire intent on turning the initiative process into his personal plaything, and not even the first to come back for several bites of the apple. But the rejection of his latest attempt to manipulate public policy for his own ends is crucial for keeping consumer-friendly insurance regulation in place.
The truth is that Proposition 33 differs from its predecessor only marginally. It exempts coverage gaps by military personnel and students whose parents kept up their own coverage. It also has an exemption for people whose coverage lapsed for up to 18 months because they were laid off. Joseph told me the changes were suggested by focus group polling after 17’s defeat, and he says he feels they’re significant enough to win over voters who voted the measure down in 2010.
“I hope so,” he says. “It’s a tremendous waste of money if they’re not.”
Michael Hiltzik’s column appears Sundays and Wednesdays. Reach him at email@example.com, read past columns at latimes.com/hiltzik, check out facebook.com/hiltzik and follow @latimeshiltzik on Twitter.