Why California’s Proposition 17 Matters

Posted in Auto Insurance , Auto Insurance Companies

May 11th, 2010

Coming up on next month’s ballot in California is a major auto insurance initiative that could have a huge effect on how drivers are charged for their coverage. The initiative is known as Prop 17 and has been making a lot of noise in recent months due to the continuous auto insurance discount.

Some say that the new proposition will be beneficial to customers because it offers a discount to individuals who are able to maintain their coverage continuously, even if they switch auto insurers. However, others say that those who are not able to maintain continuous coverage at no fault of their own could suffer from it immensely due to excessive surcharges.

Thanks to this bill, advocates and opponents have been fighting tirelessly for months to push their own agendas. Now, it will be up to voters to decide their fates.

The Fight Over Prop 17

If you’re not familiar with Prop 17, also known as the Continuous Coverage Auto Insurance Discount Act, then now’s the time to get up to speed. This proposition was introduced last year and heavily promoted by now troubled auto insurer Mercury Insurance. However, the proposition also received a lot of opposition, especially from Consumer Watchdog’s campaign affiliate, Campaign for Consumer Rights.

The organization believed that the proposition would unfairly punish individuals who were unable to maintain their continuous auto insurance coverage by charging them a major surcharge to re-establish their coverage. It felt that these heavily-promoted persistency discounts would only work for individuals under specific circumstances and would not help senior citizens, injured or disabled individuals and military personnel.

How Prop 17 Could Benefit Customers

Despite the fact that those who struggle to maintain their coverage could be hit with a surcharge if they want to reinstate their coverage, there are some benefits to this California persistency discount:

• Discount for continuous coverage: If you maintain your coverage continuously, you will be rewarded a discount on future auto insurance.
• Switch auto insurers without penalty: If you want to switch to a new auto insurance company, you can simply roll over your coverage credit like a 401(k) plan and still be considered a person with continuous coverage.
• 90-day grace period for insurance cancellations: If you do cancel your auto insurance for some reason, you have 90 days to reinstate it before you’re no longer eligible for the discount.
• Increased competition: With more auto insurance companies realizing that customers can switch companies and keep their discount, some predict that the industry will become more competitive in order to keep and lure in customers.
• The roads may be safer: If more people are able to take advantage of the persistency discount term simply for keeping their insurance, some think more will obtain and keep their insurance, which in turn helps keep the roads safer.

The Persistency Discount Isn’t New

While California is trying to make the persistency discount a law, the concept is actually not new for auto insurance companies. For instance, some are already able to take advantage of the AAA persistency discount and the Geico persistency discount if they are long-term customers.

However, the major difference between the discounts offered by these companies and the discount California is trying to implement is that you don’t have to stay with the same company to receive the discount.

California’s proposed insurance discount could possibly encourage other states to follow its lead if it is successful. This, in turn, could encourage more drivers to purchase auto insurance, which is something that benefits everyone.