Prop. 33 (car insurance premiums): Yes - The Orange County Register

When it comes to pricing insurance, it's best to match risk and reward, and the only way to match risk with reward is by using information about past behavior. Insurance markets fail when that information is not forthcoming. Or when it is deliberately withheld, as it currently is in California, thanks to Proposition 103, passed in 1988.

Under California law, drivers who follow the rules and carry car insurance earn a discount after five years of continuous coverage. But if they decide to switch insurance carriers, or drop coverage because of illness or because they were serving in the military, they lose that discount.

Prop. 33 on the Nov. 6 ballot allows consumers to keep their "continuous-driver" discount if they switch insurers. Drivers also would keep a persistency discount if their coverage lapses because of military service or unemployment of at least 18 months.

In a perfect world, insurers would be able to create whatever rating models they wished and would be free to compete for customers. California's Insurance Commission, however, allows insurers to write policies based solely on 18 criteria. Prop. 33 would add another criteria ? continuous driver history ? and that would likely go a long way to lowering car insurance rates, as has been found in the 48 other states that allow continuous-driver discounts.

The reason a continuous-driver discount winds up reducing, rather than boosting, insurance prices is evident when you consider two hypothetical drivers. The first driver's insurance history is transparent to every insurer, including competitors, while the second driver has no checkable history. Which driver would be riskier for to an insurer?

The answer to that question is obvious, but it isn't so obvious to state officials or activists. Though the state requires the purchase of automobile insurance, and although the state already has an insurance program for drivers unable to afford insurance, the poor (or infrequent drivers) sometimes allow coverage to lapse, which imposes that cost on everyone, which, of course, means higher premiums. Some 85 percent of Californians carry auto insurance; some 15 percent do not.

This lack of insurance is, in large measure, due to the higher costs imposed on consumers by the regulation of the insurance industry by self-styled "consumer watchdog" advocates, like Harvey Rosenfield, a prot?g? of Ralph Nader and former lobbyist for Nader's Congress Watch. In 1988, Mr. Rosenfield authored Prop. 103, which lowered auto insurance rates and required rate increases be approved by the state Department of Insurance.

Mr. Rosenfield has engaged in a dubious campaign to stop Prop. 33, much as he did in 1988 when he notably attempted to deliver a truckload of cow manure to State Farm Insurance Co.'s Los Angeles headquarters because "that's how consumers felt" about their insurance rates. He calls George Joseph, the billionaire founder of Mercury Insurance Group and funder of Prop. 33, a "Grinch" who will steal "Christmas."

Mr. Rosenfield's group attacked Prop. 33's backers for mentioning how it is supported by many military personnel, even though his group did the same thing during a previous initiative campaign.

Mr. Rosenfield said in a 2011 story for the Los Angeles Times that he was preparing a new ballot initiative to regulate health insurance rates in California.

As Rosenfield once told the Los Angeles Times, "You can't make some compromises when you are a consumer advocate." Insurance requires a balanced approach, divorced from politics. We recommend a Yes vote on Prop. 33.

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Source: http://www.ocregister.com/opinion/insurance-372964-prop-driver.html

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