05/06: June 8, 2010 Election - Proposition 17 Analysis
The main point I see after analyzing the law, is that it doesn't match what anybody is telling us about it. We are told that Proposition 17 is creating a discount that was never there before, or, from other sources, that the discount is being newly allowed to have continuity from insurer to insurer. None of these claims seem to be true. (Though I could not find a good legal analysis by anybody making such claims, which I would find immensely helpful.)
For my part, I have done my own analysis of both the proposition, as well as the Attorney General's analysis of the proposition.
The actual law itself is short and the real meat is in sections 4 and 5 of the text, which respectively add verbage to, and remove verbage from, the Insurance Code. So effectively, what we have is a rewording of existing law. Here are the changes:
Discount: While the difference may seem trivial, the old law provided that insurers could use continuity of coverage as an optional rating factor, whereas the new law refers to a continuity discount. Rating factors were explicitly tied to how an insurer may price their insurance offerings, and the effect is to allow a discount for continuous coverage. The reason I mention this, is that there may be some legal definition I am not aware of that makes this subtle change of verbage more significant than I would superficially guess. (See: Proposed 1861.024(a) in Section 4 of the text and compare with the text struck out in Section 5.)
Continuity Discount for Children: Children, under proposition 17 would be able to claim a continuity discount on the basis of their parents' eligibility for a discount.
Proof of Coverage: Proof of Coverage from a prior insurer is now explicitly mentioned as being a basis upon which one can claim continuous coverage. (However, it is not altogether clear that this is not redundant, or that this was not implicit under previous legislation. In fact, it does seem implicit at the very least, but it is hard to say what precedent had been set by judges interpreting the old wording.)
Discount Eligibility: Proof of Coverage from a prior insurer is now explicitly mentioned as being a basis upon which one can claim continuous coverage. (However, it is not altogether clear that this is not redundant, or that this was not implicit under previous legislation. In fact, it does seem implicit at the very least, but it is hard to say what precedent had been set by judges interpreting the old wording.)
Maintenance of Eligibility for Veterans: Under the current law, eligibility for continuity discounts can be maintained by veterans serving overseas for a period of up to two years. Under Proposition 17 the discounts for this class of individuals would be maintained indefinitely.
Maintenance of Eligibility Generally: Under the current law, a laps in coverage of more than 90 days is required to cause one to lose one's eligibility for continuity discounts. Under Proposition 17 the same period of time is required, unless one's coverage lapses due to non-payment of premium. Also, under the new law, an insurer is explicitly allowed to offer further grace periods for lapses in coverage.
Overall, the effect seems fairly positive. If it weren't for the apparent corruption that seems to surround this proposition, it might seem like a good idea. (Though, I'd be curious on the demographics of those who lapse due to non-payment in comparison with those who spend more than 2 years serving overseas in the military, and on that note, I would want to carefully consider the merits of dropping eligibility for non-payment of fees.) However, everyone seems to be lying about this proposition, and I'm no lawyer, so instinctively I would take a conservative approach and vote no.
Critique of the Attorney General's Analysis
The Attorney General's analysis is given below (an unordered list has been replaced with an ordered list to facilitate citation):
ALLOWS AUTO INSURANCE COMPANIES TO BASE THEIR PRICES IN PART ON A DRIVERíS HISTORY OF INSURANCE COVERAGE. INITIATIVE STATUTE.
- Changes current law to permit insurance companies to offer a discount to drivers who have continuously maintained their auto insurance coverage, even if they change their insurance company, and notwithstanding the ban on using the absence of prior insurance for purposes of pricing.
- Will allow insurance companies to increase cost of insurance to drivers who do not have a history of continuous insurance coverage.
- Establishes that lapses in coverage due to nonpayment of premiums may prevent a driver from qualifying for the discount.Summary of Legislative Analystís Estimate of Net State and Local Government Fiscal Impact:
- Probably no significant fiscal effect on state insurance premium tax revenues.
First off, we have the title. Based on my analysis, the new law does nothing to change the basic ability of insurers to base their prices upon a driver's history of insurance coverage. Technically, the new law makes the allowance, but that is only because the old law will not exist anymore. The proposition itself, however, does not have this effect. (Insurers will apparently be able to base their rates on continuous coverage whether this proposition passes or not.)
Now to the first listed "effect". The current law already allowed continuous coverage discounts "notwithstanding the ban". In fact, the old verbage was an exception directly attached to the ban. What Proposition 17 does is strike the exception to the ban and rewrite it in a separate portion of the code.
The second listed effect is interesting. It is not at all clear, in comparison with the old law, that there is anything more going on here than the same old continuous coverage rating factor, which, of course, would lead to drivers without continuous coverage being charged more. It appears that the Attorney General is once again analyzing the effect as if the old law didn't exist to begin with.
The third point, along with the fiscal analysis, seem to be the only valid points made.
Overall, it seems to me that the Attorney General is trying to bias voters to support this proposition, which makes me want to do the opposite.