Dolores Huerta: California's Proposition 33 Legalizes Insurance Discrimination

Posted on 01 November 2012

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By Dolores Huerta
Recipient of the Presidential Medal of Freedom
President, Dolores Huerta Foundation for Community Organizing

Proposition 33 would return us to an era when discrimination in insurance was commonplace. If billionaire George Joseph gets his way, millions of Californians would pay higher auto insurance premiums. Mr. Joseph owns Mercury Insurance. He has donated $16.4 million to Prop 33.

Back when insurance discrimination was legal in California, the industry redlined lower income minority communities. Auto insurance was mandatory, but good drivers in inner city neighborhoods who wanted coverage were priced out of the market. The excuse was that these drivers were not previously insured, and therefore they needed to pay more to get insured.

In 1988, voters enacted Proposition 103. This stopped insurers from charging higher rates to customers simply because they lacked coverage in the past. Everyone benefited, because making insurance more affordable reduced the number of uninsured drivers on the road.

Prop 103 gives the Insurance Commissioner the authority to reject insurance rate increases if they are not justified. A company that wants to charge a particular class of motorists more must provide evidence that the class of motorists is more likely to cause an accident.

Proposition 33 changes this. A loophole hidden in the measure's fine print allows insurers to raise rates on most drivers who lack prior coverage or who had a break in coverage for 90 days within the past five years. Prop 33 eliminates the Insurance Commissioner's power to stop these surcharges, even when an insurance company has absolutely no evidence that a break in coverage increases the driver's accident risk.

The urban poor are not the only targets for Proposition 33's rate hikes. Senior citizens who suspend their policy to economize when they are temporarily disabled and not driving will pay a surcharge when they recuperate and resume driving. People who commute by mass transit, but start driving if they move, or their job moves, will pay more. Graduating college students who biked to campus, and long term unemployed workers who suspend coverage while they aren't commuting to work, will pay much more for insurance when they find a new job and get behind the wheel.

But it's not just these consumers who will pay more. We all will. That's because Prop 33's big premium rate increases will squeeze many low income motorists out of the insurance market entirely. The Department of Insurance stated, the Prop 33-style surcharge "discourages [people] from buying insurance, which may add to the number of uninsured motorists and ultimately drives up the cost of the uninsured motorist coverage for every insured."

We should be wary when a billionaire funds a self-enrichment ballot scheme. We will all pay if insurance discrimination against the poor and communities of color is brought back. Please join me in voting NO on Prop 33.

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Dolores Huerta is President of the Dolores Huerta Foundation for Community Organizing. She is a civil rights and labor leader, co-founder of the United Farm Workers of America and a recipient of the Presidential Medal of Freedom. This article was originally published at Consumer Watchdog.

Insurance companies shoud be able able to reward with lower rates drivers with good driving records---no accidents.

Insurance companies are able to do this right now. Driving history is one of the 3 main factors for rate setting.

I wonder if you are misinterpreting the author's point. I think she is pointing out that it is important to distinguish between "apples & oranges": That is, the issue of penalizing newly insured drivers is inherently different from the issue of "penalizing"/"rewarding" drivers (1) who have absolutely no track record (i.e. brand new drivers), (2) who have proven negative track records (history of DUI, speeding, causing accidents, revoked license, etc.), or (3) who have proven positive track records (+ safe driving record, no moving violations, no or rare insurance claims, + anti-theft device, etc.).

Newly insured drivers are not necessarily equivalent to new drivers or poor drivers. For example: people with safe driving records in other states who have just moved to CA; experienced drivers who have just moved from an area with excellent public transportation to an area with poor or absent public transportation; etc.

Insurance rates are set by the cost of providing the service. Insurance rates for inner city poor were higher because there was a higher claim record. You can deny this and make it illegal to charge higher rates for this. However, it is not a "win win". The insurance companies will have to boost the rates for everybody to cover this subsidy.

Any time you muck up the market, someone pays. Your just shifting the cost from the person who benefits from the service to someone else.

Insurance companies ARE allowed to charge more to those who reside in certain zip codes. I paid much more living in San Francisco than where I live now. And sure enough I made two claims in SF (stolen vehicle and minor accident) and none yet in my new town. Zip code is an allowable rating factor for a reason-- it can be correlated with risk.

What we're talking about here is charging more money to those who don't already have insurance or needed to suspend coverage for a period of time. When insurance became mandatory, this hit certain areas much harder than others. Here's some history for you:

Prior coverage is not an allowable factor because it is NOT correlated with risk. If it was provable, Mercury insurance's attempts at using it wouldn't have been thrown out of every arena they've been tried in.

If Mercury insurance was charging more for no prior history and the cost was not real, than some other company would charge less. Mercury would be less competitive and loose business and money.

However, in a larger sense, why should the government be involved in these type of private business transactions? It would never end. There are litterally thousands of such transactions going on hourly. let the marketplace work. If the government gets involved we than need regulators to see that these regulations are enforced properly. We will have lawsuits because various parties will disagree. On and on this nonsense will happen.

Let's not have this become a discussion about our thoughts on regulation. Too vast and too off topic. It would be disservice to the article.

I agree about: "Let's not have this become a discussion about our thoughts on regulation. Too vast and too off topic. It would be disservice to the article."

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