Proposition 33 would allow insurance companies to price auto insurance policies based on how long a driver has had insurance with any company. The proposition attempts to work around California regulations on auto insurers (invoked by Proposition 103 in 1988), which prohibits insurance companies from using the lack of prior insurance to determine what a new customer will pay. Insurance companies can offer a “continuous coverage” or “loyalty” discount to their existing customers, but cannot offer such prices to new customers, even if they had insurance with another company. Proposition 33 would allow insurers to offer such “continuous coverage” or “loyalty” discounts to customers who had continuous coverage with other companies, even if the customer had a gap of less than 90 days in the past five years for any reason, a gap longer than 18 months because of loss of employment due to layoff or furlough, or was serving on active duty in the military. Currently, insurers in California are allowed to set rates based on only three criteria: driving safety record, number of miles driven each year, and the number of years driving.
Why vote no?
In 2010, a similar measure, Proposition 17, was defeated at the polls. At that time, the non-partisan Office of Legislative Analyst warned that while insurance rate-setting was very complex, any discount to one group of customers would be offset by increases in rates to others. Therefore, it may be a reasonable conclusion that if insurers offer discounts to customers who had no gaps in insurance coverage, they would raise the auto insurance rates for drivers who did have a gap in coverage. Proposition 33 also may violate California law (under Proposition 103), because it will allow insurers to penalize customers who had not driven previously.
What if Proposition 33 passes?
If Proposition 33 passes, insurers will be able to offer discounts to customers with continuous driving records and insurance coverage, but will also allow insurers to charge higher rates to customers who had not driven or had lapses in insurance coverage (such as living overseas, out of state, lifestyle changes, etc., none of which are exemptions under the measure.