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Mobile or Single ColumnAuto Insurance Companies. Prices Based on a Driver's History of Insurance Coverage.
- Pros & Cons -
Proposition 33
Auto Insurance Companies. Prices Based on a Driver's History of Insurance Coverage.
Initiative Statute
The Question:
Should automobile insurance companies be permitted to offer a discount to drivers who have continuously maintained their insurance coverage, even if they change their insurance company?
The Situation:
California regulation of auto insurance was established by Proposition 103 in 1988. It requires that rates and premiums be set by three factors in decreasing order of importance (1) driving safety record; (2) number of miles driven each year; and (3) number of years the insured has been driving. Proposition 103 prohibits insurance companies from using the absence of a prior insurance policy as a factor in rate-setting. Insurance companies can offer a "continuous coverage" or "loyalty" discount to customers insured by their company for a specified length of time, but are prohibited from offering this kind of discount to new customers who switch to them from other insurers.
California insurance companies pay an insurance premium tax instead of the corporation income tax; in 2011, this tax amounted to about $500 million, paid into the state general fund.
The Proposal:
Proposition 33 is similar to Proposition 17, which was defeated at the polls in June 2010. It would allow insurance companies to offer a “continuous coverage” or “loyalty” discount to new customers who switch their coverage from a different company, as long as the customers had maintained continuous coverage with their former company. Continuous coverage would still apply to those whose lapses in coverage were (a) not longer than 90 days in the past five years for any reason; (b) ot longer than 18 months because of loss of employment due to layoff or furlough; or (c) due to active military service. Children of driving age residing with a parent could qualify for the discount based on the parent’s eligibility. Drivers who were insured at some time during the immediate past 5 years, but do not meet the above criteria, would receive a proportional discount based on the number of years during which they were insured.
Fiscal Effect:
The additional continuous coverage discounts could reduce the amount of premium revenue received by the state, but that would generally be made up by additional premiums paid by those not eligible for such discounts. The net impact on state insurance premium revenues probably would not be significant.
A YES Vote Means:
Insurance companies could offer new customers a discount on automobile insurance premiums based on the number of years in the previous five years that the customer was insured.
A NO Vote Means:
Insurers could continue to provide discounts to their long-term automobile insurance customers, but would continue to be prohibited from providing a discount to new customers switching from other insurers.
Supporters Say:
- Prop 33 allows drivers to shop for a better insurance deal by continuing to receive "continuous coverage" discounts when they change insurance carriers.
- Prop 33 will result in more competition between insurance companies, resulting in better insurance rates for drivers.
Opponents Say:
- Prop 33 will allow insurance companies to increase the cost of insurance to drivers who have not maintained continuous coverage.
- Drivers with perfect driving records would pay an unfair penalty if they have not had continuous coverage in the past.
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Measure Rejected
Voted on November 6, 2012
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