The danger of making auto insurance unaffordable [The reply]
Auto insurance could become too expensive for some Californians if George Joseph, chairman of insurer Mercury General Corp., gets his way. He's proposed an initiative for the June 2012 ballot that would reward longtime insured drivers but could ultimately price out the people who haven't previously or consistently been insured. In a Sept. 21 Op-Ed, Jamie Court, president of Consumer Watchdog, helped people read between the lines:
This latest attempt exempts soldiers and those who have been unemployed for 18 months from the surcharges. But anyone else who has stopped driving for any period of time could be hit hard. After 18 months of being out of work and taking mass transit, sorry, Commuter Charlie. When you're ready to get in the car again, you will pay more for insurance. Same goes for someone who's moved to Los Angeles but has lived in, say, Manhattan for the last 10 years and didn't need a car. […]
It's hard to imagine turning back the clock to the days of rampant auto insurance price discrimination. But if Joseph has his way, insurance companies could raise prices on the people least able to afford insurance and discriminate against them based on insurance industry beliefs that the poor, students and the long-term unemployed are the least desirable customers.
Some readers have rebuffed Court's Op-Ed, saying that his alternative is akin to "Obamacare" and that auto insurance isn't something we ought to socialize. Here is Court's reply to those readers.
First-time drivers, without a driving safety record, are not subsidized by longtime drivers under the current rules. Regulations implementing insurance reform Prop. 103 said those with good driving safety records pay the least. The next most significant factor in determining a rate is "years of driving experience." Then miles driven annually. So long-term drivers already get a break for having more experience, particularly if they don't cause accidents. In fact, California has the most protective rules in the nation to ensure that your driving experience be calculated so there is subsidy of new drivers. However, what Mr. Joseph proposes is to create a barrier to anyone who hasn't driven for some time or owned a car from entering the insurance market. This could result in more uninsured motorists and force us to subsidize those who cannot afford an insurance policy. It's not theoretical -- it happened prior to the ban on the use of considering prior insurance in rate making.
Photo: Mercury General Corp.'s George Joseph at his desk in Los Angeles. Credit: Wally Skalij / Los Angeles Times