California Proposition 33 Will Change Auto Insurance Rates

Credit: daveynin / Flicker[/caption]

California Proposition 33 will change auto insurance rates by allowing insurance companies to set rates based on a driver’s history of continuously having insurance with any insurance company rather than just with the current insurer. Most drivers with a history of continuous insurance would be eligible for lower rates. However, some would pay more.

George Joseph, founder of Mercury Insurance, is the primary funder of Prop 33. He has contributed $8 million of his own money. He funded a similar measure, Prop 17, in 2010 with nearly $15 million. His deep pocket funding predictably makes the No on 33 forces suspicious as to his intent. His supporters say Joseph genuinely believes Prop 33 will increase competition and thus lower rates. Still, others may wonder why such a relatively trivial matter is even on the ballot at all. However, the California Constitution allows direct citizen participation in legislative matters by using the proposition process.

Proposition 33:

  • Changes current law to allow insurance companies to set prices based on whether the driver previously carried auto insurance with any insurance company.
  • Allows insurance companies to give proportional discounts to drivers with some history of prior insurance coverage.
  • Will allow insurance companies to increase cost of insurance to drivers who have not maintained continuous coverage.
  • Treats drivers with lapse as continuously covered if lapse is due to military service or loss of employment, or if lapse is less than 90 days.

The nonpartisan Legislative Analyst’s Office sees little difference in total tax revenue for auto insurance if Prop 33 passes:

Introducing continuous coverage discounts could reduce the amount of premiums paid by those who are eligible for the discounts. However, this would generally be made up by additional premiums paid by those who are not eligible for such discounts. The net impact on state premium tax revenues from this measure would probably not be significant.

Therefore, the dollar amount of auto insurance policies might not change much in California if Prop 33 passes, but some could end up paying much more:

If Prop. 33 passes about 80 percent of the state’s drivers could qualify for a continuous coverage discount. That discount will be paid for by drivers that don’t qualify — and they will likely end up paying substantially higher car insurance rates.

The Yes on 33 campaign says the proposition rewards responsible drivers while No on 33 says it will increase rates in ways that are prohibited now. Voters may wish to study the arguments on both websites before making a decision.