California Car Insurance Law Raises Questions

California In California, there is an initiative called the 2012 Automobile Insurance Discount Act. It has been described as allowing drivers who have had continuous auto insurance coverage to get a price break. If this initiative passes, will it be good for consumers? Some have raised concerns about why it might not be as good as it sounds.

The 2012 Automobile Insurance Discount Act is designed to do a number of things that sound like they would be good for California drivers. It would give drivers who have had continuous auto insurance coverage a discount on their premiums. This discount would follow the driver if he or she decided, sometime later, to switch car insurance companies.

This dynamic has been compared to a change that happened in the cell phone industry. There was a time when consumers could not take their cell phone number with them if they decided to switch to a different carrier. Most of the time, the reason why a consumer wanted to switch companies was because a different company was offering a better price than their current one was. Today, consumers are allowed to keep their cell phone numbers when they switch to a different carrier.

The 2012 Automobile Insurance Discount Act is currently an initiative. Before it can become a law, it has to be placed on a ballot, and has to receive a certain amount of votes. Petitions have collected more than 505,000 signatures from registered voters who are in favor of this initiative becoming a law. They believe the law will create more competition between auto insurance companies, and they would like to receive the continuous coverage discount.

Opponents of the initiative point out that it is unconstitutional, and that it violates Proposition 103. That proposition was a 1978 auto insurance reform initiative. It required auto insurance premiums to be primarily based on three factors: a driver’s safety record, the number of miles the person drives in a year, and the number of years of driving experience that a person has.

In other words, basing the cost of a person’s auto insurance premium on whether or not the driver had continuous auto insurance coverage would go against Proposition 103. The Consumer Federation of California notes that it would also penalize drivers who had a lapse in coverage, no matter what the reason for that lapse happened to be. This matters, because people are required by law to purchase auto insurance in California.

Other concerns have to do with the fact that Mercury Insurance, and its founder, George Joseph, are behind the 2012 Automobile Insurance Discount Act. Mercury Insurance specializes in low cost auto insurance coverage. In 2010, Mercury Insurance spent around $16 million on a campaign to pass Proposition 17, which would have created a similar discount to drivers who had continuous coverage. That proposition was not passed.

Some have concerns that perhaps Mercury Insurance is hiding something in this new initiative that would not be good for consumers. Others feel that CEO George Joseph simply wants to leave a legacy, and wants to do what is good for California.

Image by photologue_np on Flickr

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About Jen Thorpe

I have a B.S. in Education and am a former teacher and day care worker. I started working as a freelance writer in 2010 and have written for many topics here at