Insurance Commissioner Ricardo Lara should reject Mercury Insurance Company’s proposed $131 million auto insurance rate hike and its job- and education-based discriminatory rating system under which working-class Californians pay up to 20% higher premiums, wrote Consumer Watchdog in a petition filed with the California Department of Insurance (CDI) yesterday.
Under Mercury’s proposed overall 6.9% rate increase, over 1.6 million vehicles it insures face an average annual premium increase of $80 per insured vehicle. Because the Insurance Commissioner has failed to act on a regulation to curb job- and education-based rate discrimination, the worst of that rate increase will fall on the majority of low-income drivers Mercury doesn’t give a job-based discount, said Consumer Watchdog.
These grocery clerks, hotel workers, janitors, home healthcare aides and other drivers without white-collar jobs will be charged base rates that are more than $200/yr higher than drivers in one of Mercury’s preferred groups.
A 2019 investigation by the Department of Insurance found Mercury and other companies’ practice of charging some drivers more based on education and occupation results in low-income drivers and communities of color paying more. Three years later, Commissioner Lara has yet to adopt a regulation to stop the practice. The last draft of a potential regulation was issued by the Department of Insurance nearly a year and a half ago and no action has been taken since.
Consumer Watchdog called on Commissioner Lara to reject Mercury’s use of job and education to overcharge working-class Californians in this rate filing, and move a regulation forward to make all insurance companies rate Californians fairly regardless of their job or education level.
Mercury’s request comes as soaring gas and food prices have low-wage workers struggling now more than ever to make ends meet. Most policyholders—from waiters to cashiers, construction workers to call center operators—will see their auto insurance rates increase up to about 20% more than drivers with professional occupations and advanced degrees such as engineers with a Bachelor’s degree or higher education level. Mercury’s request also includes rate hikes on educators, paramedics, firefighters, and police officers.
“The last thing Californians should have to worry about when we’re facing sky-high prices at the gas pump and grocery store is whether they’re being gouged by their insurance company,” said Consumer Watchdog staff attorney Daniel L. Sternberg. “Discriminatory discounts for engineers, pilots, and other high-paid professions favored by Mercury means that low-income drivers pay more for car insurance, simply because of their job title or education status.”
“Commissioner Lara needs to help working families and adopt regulations to stop occupation-based premium surcharges; surcharges that his own 2019 investigation found create ‘wide socioeconomic disparities.’ Instead of rubber-stamping these discriminatory discounts, the Commissioner should use his voter-enacted authority under Proposition 103 to protect middle- and low-income families from being charged higher prices based on their jobs,” said Sternberg.
The Commissioner last approved Mercury’s discriminatory occupation-based rating system and a 6.9% overall rate increase for Mercury policyholders in May 2019. Under Mercury’s 5-tierd rating system, Mercury customers in lower wage occupations, such as grocery clerks, hotel and hospitality workers, janitors, and home healthcare workers, pay as much as 20% more than engineers, scientists, doctors, accountants, pilots and educators for all coverages combined, all other characteristics being equal.
Occupation has never been approved by regulation as a lawful rating factor under voter-enacted Proposition 103. Mercury’s unfairly discriminatory occupation-based rating system means lower income and less-educated drivers continue to pay the highest premiums based solely on their job titles.
Consumer Watchdog’s petition also alleges that Mercury overcharged policyholders during the COVID-19 lockdowns when accident claims were down and may owe hundreds of millions in additional refunds.
Read Consumer Watchdog’s Petition for Hearing and Petition to Intervene: https://consumerwatchdog.org/sites/default/files/2022-07/2022-07-18%20Mercury%20Auto%202022%20PFH%20w%20Exhs%20A%20and%20B.pdf
Consumer Watchdog and 10 community and civil rights organizations challenged auto insurers’ illegal and discriminatory use of job and education to set rates in February 2019. In September 2019, a Department of Insurance investigation confirmed those concerns, finding “wide socioeconomic disparities” created by insurance companies surcharging California drivers based on nothing more than their occupation or educational status. In December 2019, the Department proposed regulations to address this unfair discrimination. However, almost three years later, those rules have not yet been implemented.
Read the community and civil rights groups’ petition: https://consumerwatchdog.org/sites/default/files/2019-02/Job%26EducationPetition.pdf
The Department’s analysis of industry data shows that drivers in the highest per capita income ZIP codes are more than twice as likely to receive occupational-based discounts than drivers in the lowest per capita income ZIP codes; and only 29% of drivers in predominately minority ZIP codes receive such discounts as compared with 47% of drivers living in ZIP codes with a predominately white population. In addition, 75% of drivers in Underserved Communities as defined by Department of Insurance regulation do not receive these discounts.
Voter-approved Proposition 103 requires auto insurance premiums be based primarily on three mandatory factors – driving safety record, annual mileage, and years driving experience – and prohibits unfairly discriminatory rates. Proposition 103 prohibits this kind of unfair rate discrimination based on income or race.