Consumer Watchdog Calls on Insurance Commissioner Lara to Reject Mercury Employment-Based Insurance Rate Discrimination; Defies $131 Million Increase in Mercury Auto Insurance Rates

LOS ANGELES, July 19, 2022 /PRNewswire/ — Insurance Commissioner Ricardo Lara should reject Mercury Insurance Company’s proposal $131 million rising auto insurance rates and its discriminatory pricing system based on employment and education under which working-class Californians pay up to 20% higher premiums, Consumer Watchdog wrote in a petition filed yesterday with the California Department of Insurance (CDI).

As part of Mercury’s proposed 6.9% overall rate increase, more than 1.6 million insured vehicles face an average annual premium increase of $80 per insured vehicle. Because the insurance commissioner failed to act on a settlement aimed at addressing rate discrimination based on employment and education, the worst of this rate increase will fall on the majority of low-income drivers. Mercury does not provide an employment-based discount, Consumer Watchdog said.

These grocery clerks, hotel workers, janitors, home health aides and other unemployed white-collar drivers will be charged base rates above $200/year higher than that of drivers in one of Mercury’s favorite groups.

A 2019 investigation by the Department of Insurance found that the practice by Mercury and other companies of charging certain drivers more based on education and occupation results in low-income drivers and communities of color pay more. Three years later, Commissioner Lara has still not adopted a regulation to put an end to this practice. The last potential draft regulations were released 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 labor and education to overburden working-class Californians in this rate filing, and to push forward regulations for all insurance companies to rate Californians equally, regardless of work or education.

Mercury’s request comes as soaring gasoline and food prices are forcing low-wage workers to struggle harder than ever to make ends meet. Most policyholders – from waiters to cashiers, construction workers to call center operators – will see their car insurance rates increase by up to around 20% more than drivers with professional occupations and higher degrees such as than engineers with a bachelor’s degree or higher education. Mercury’s request also includes rate increases for educators, paramedics, firefighters and police officers.

“The last thing Californians should have to worry about when we’re faced with exorbitant prices at the gas pump and at the grocery store is whether they’re getting ripped off by their insurance company,” said Consumer Watchdog’s attorney. Daniel L. Sternberg. “The discriminatory discounts for engineers, pilots and other high-paying professions favored by Mercury mean that lower-income drivers pay more for auto insurance simply because of their professional designation or level of education. “

“Commissioner Lara must help working families and pass regulations to end occupation-based premium surcharges; the surcharges its own 2019 survey found create “great socio-economic disparities.” Instead of automatically approving these discriminatory discounts, the commissioner should use his voter-enacted power under Proposition 103 to prevent middle- and low-income families from being charged higher prices based on their employment,” Sternberg said.

The commissioner last approved Mercury’s discriminatory occupation-based rate system and an overall rate increase of 6.9% for Mercury policyholders in May 2019. As part of Mercury’s 5-tier rating system, Mercury customers in low-wage positions, such as grocery clerks, hotel and hospitality workers, janitors, and home healthcare, pay up to 20% more than engineers, scientists, doctors, accountants, pilots and educators all benefits combined, all other characteristics being equal.

Occupation was never approved by regulation as a legal scoring factor under Proposition 103 passed by voters. Mercury’s unfairly discriminatory occupation-based grading system means lower-income and less-educated drivers continue to pay the highest premiums based solely on their job titles.

The Consumer Watchdog petition also alleges that Mercury overcharged policyholders during COVID-19 lockdowns when accident claims were down and may owe hundreds of millions in additional reimbursements.

Read Consumer Watchdog’s Hearing Petition and Intervention Petition: 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 have challenged auto insurers’ illegal and discriminatory use of employment and education to set rates in February 2019. In September 2019an Insurance Department survey confirmed those concerns, finding “great socio-economic disparities” created by insurance companies overcharging California drivers solely on the basis of their profession or level of education. In December 2019, the Department has proposed regulations to address this unfair discrimination. However, almost three years later, these rules have still not been implemented.

Read the petition from community and civil rights groups: 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 business rebates as drivers in the highest per capita income zip codes. down ; and only 29% of drivers in predominantly minority ZIP codes receive such discounts, compared to 47% of drivers living in ZIP codes with a predominantly white population. Additionally, 75% of drivers in underserved communities as defined by Department of Insurance regulations do not qualify for these discounts.

Voter-approved Proposition 103 requires auto insurance premiums to be based primarily on three mandatory factors — driving record, annual mileage and years of driving experience — and prohibits unfairly discriminatory rates. Proposition 103 prohibits this type of unfair price discrimination based on income or race.

SOURCE Consumer Watchdog

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