While California is working to improve car insurance regulation in the state, one of a new bill’s strongest backers is being run through the wringer. Mercury Insurance Group, who has positively stood behind the upcoming June vote on the “Continuous Coverage Discount Initiative,” has been accused of false practices and fraud.
According to an article in the San Francisco Chronicle in February 2010, the accusations came out in a hefty report put out by the Department of Insurance, outlining Mercury’s activities from the mid-1990s to 2004. The gist is that Mercury violated Proposition 103, which was designed in 1988 to protect consumers in the insurance industry.
Here is a sampling of some of what Mercury was accused of doing:
1. Charging some policyholders more for their premiums because they were involved in car accidents, even if they were not found at fault.
2. Charging higher premiums to policyholders after insurance agents quoted the policyholders a rate that included discounts they were not actually eligible for (the old bait and switch model).
3. Charging higher premiums for auto insurance than California permits. They did this by requiring insurance brokers to return part of their fees.
4. Hesitating to cover those who are entitled to car insurance at a special rate, including military personnel, emergency vehicle drivers and people working in the entertainment industry.
5. Asking about a policyholder’s national origin. Mercury stopped doing so after insurance investigators brought it up.
There were 25 such instances in the report. There are seven remaining that Mercury has yet to address.
On the Defensive
Those on Mercury’s side say this report was brought up to convolute the issue around the upcoming “Continuous Coverage Discount Initiative” vote, for which Mercury has been a strong advocate. Mercury has put several million dollars into supporting similar measures in California, which will give consumers a more balanced playing field in which to buy auto insurance.
Mercury has also donated money to a California government candidate, which may also confuse the issue of them being in the spotlight. Clearly, being so public in its lobbying and then having strong allegations against the company is creating a dichotomy of opinions in the state.
But this isn’t the first time Mercury has been charged with treating its customers poorly. The third largest car insurer in the state, Mercury has a reputation of abusing its privileges as an insurer and skirts the line when it comes to regulations in the state.
Since 2006, the State of California has fined Mercury $600,000 resulting from various consumer complaints against the insurer.
No matter what the outcome, it is clear that Mercury needs to clean up its act, treat customers more fairly, and play by the rules in California and the other states it operates in.
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