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Jul 03, 2003
by STEVE LAWRENCE, Associated Press Writer
Assembly committee backs bill pushed by major campaign donorSACRAMENTO (AP) -- Auto insurance rate legislation pushed by a major campaign contributor was approved Wednesday by an Assembly committee -- despite arguments that it would violate voter-approved Proposition 103 and hurt many low-income drivers.
The bill, by Sen. Don Perata, D-Oakland, would allow auto insurers to offer "persistency discounts" to try to lure longtime customers away from their competitors.
Gov. Gray Davis vetoed a nearly identical bill last year at the urging of then-Insurance Commissioner Harry Low.
Supporters said the legislation, which cleared the Assembly Insurance Committee on a 14-3 vote, would spur competition and help motorists shop around for the lowest insurance rates.
Opponents said it would violate Proposition 103's ban on basing rates on lack of prior insurance and would result in higher premiums for drivers who have gaps in their coverage. Often those drivers are among the poorest in the state, they said.
"It works against people who don't have the money to be insured or have been uninsured for various reasons," said Norma Garcia, a lobbyist for Consumers Union.
Doug Heller, a lobbyist for the Foundation for Taxpayer and Consumer Rights, said the bill could result in a 38 percent higher rate for the customer with a gap in coverage, based on information he got from the Web site of Mercury Insurance, the bill's chief supporter.
Heller noted the bill would allow people to qualify for persistency discounts even though they had a two-year gap in coverage because they were out of the state for military service.
Other motorists would only be allowed a 90-day coverage gap in the previous five years to qualify for the discounts.
Supporters said the bill would merely make portable discounts the Department of Insurance allows insurers to offer their longtime customers. "You're entitled to that discount because you are persistently insured, not because you are persistently insured at Mercury or Farmers," said Kathy Snodgrass, a lobbyist for Mercury.
Assemblyman John Campbell, R-Irvine, said the law requires motorists to have insurance and that Perata's bill would justifiably "create a financial penalty for people who break the law."
John Norwood, a lobbyist for the Insurance Agents and Brokers Legislative Council and Progressive Insurance Co., said the current discount system works against small insurers who are trying to expand their share of the market.
"There either has to be a portable persistency discount or no persistency discount at all," he said.
But Heller said there are demonstrated savings for the insurer when a customer stays with one company for a long period of time, such as lower advertising costs. Mercury hasn't been able to convince the department there are savings when the longtime customer changes companies, he added.
The Insurance Committee chairman, Assemblyman Juan Vargas, D-San Diego, admonished Heller when he held up a fake $10,000 bill to refer to the nearly $2 million in campaign contributions that Mercury has handed out since the start of 2000, including donations to at least 12 of the 19 Insurance Committee members.
"Obviously you're playing to the media here," he told Heller. "This is not a circus. This is a committee room."
Heller said later that the "real circuses are the endless circus of fund-raisers that get us to the point where the contributions of one insurance company are more important than the voices of consumers, low-income representatives and the insurance commissioner."
On the Net: Read the bill, SB841, at www.assembly.ca.gov
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