Wednesday, 14 April 2010 14:41

CDI Reports Mercury Insurance Overcharged and Discriminated Against Drivers for 15 Years

The California Department of Insurance (CDI)  said on April 12 that Mercury Insurance Company, the sponsor of California's Proposition 17, has overcharged and discriminated against California customers for over fifteen years, including failing to deliver discounts required by state law and imposing unlawful surcharges.

California’s insurance commissioner Steve Poizner says the insurer “disregarded” state laws and may have illegally overcharged thousands for auto and homeowners’ insurance.

Mercury Insurance, however, is accusing the insurance commissioner of advancing his “political interests.” Insurance Commissioner Steve Poizner is a Republican candidate for California governor.

CDI says it found 35 categories of alleged violations between March 1, 2007, and May 31, 2007, during a market conduct examination of Mercury Insurance. Mercury has 10 days to correct each violation, or face a $5,000 fine per violation and an additional $5,000 fine for each violation, if deemed willful, according to the California Department of Insurance (CDI).

Consumer advocates said that the new CDI report is certain to affect voters' view of Proposition 17, Mercury's controversial initiative on the June ballot.

"This troubling report shows that Mercury Insurance has overcharged its policyholders for a decade and half, but now it wants the voters to believe it is spending millions on Proposition 17 to charge less for auto insurance," said Harvey Rosenfield, author of insurance reform Proposition 103 and founder of Consumer Watchdog. "These new revelations show Mercury Insurance's promise that Proposition 17 will lower premiums is like Bernie Madoff backing a ballot proposition to protect investors."


CDI announced that it filed an administrative lawsuit against Mercury last Friday and gave it ten days to correct every violation of law identified in its investigation or face massive fines.

In its latest investigation, which began in March, 2007, CDI found that Mercury improperly applied surcharges to its customers, failed to give customers the discounts they were due, discriminated against people with certain medical conditions, and refused to insure applicants based on their occupation.

The Department also determined that Mercury had violated its own agreement to stop violations that were uncovered by CDI investigations completed in 1998 and 2002. 

"How can voters trust an insurance company that violated its own promise to regulators to stop breaking the law?" Rosenfield asked. "This report should be the nail in Prop 17's coffin. Voters won't stand for a lying insurance company deceiving them once again."

Mercury wrote, and has spent $3.5 million on, Proposition 17 on the June ballot, which would allow insurance companies to add a new surcharge on drivers' premiums based on whether or not they previously purchased auto insurance, even if they didn't drive, or missed an insurance payment. The company's commercials are telling people that Prop 17 would lower auto insurance premiums.

Among the 54 practices identified by the CDI in today's report as potential violations of state law are numerous practices that violate Proposition 103, the 1988 voter approved insurance reform measure that Mercury's Proposition 17 targets.

Among the practices uncovered by state investigators:

  • Mercury continues to surcharge certain people (by 15%) who are required to carry proof of insurance coverage – a violation of existing law. Mercury's Proposition 17 would legalize such surcharges and allow insurance companies to apply them across the board.
  • Mercury fails to give customers the discounts they are entitled to under state law.
  • Mercury instructed its agents to refuse to sell binding coverage to people who are handicapped or whose health is impaired.
  • Mercury charges people for accidents for which they were not at fault.
  • Mercury refuses to sell insurance to artisans who are good drivers, or to painters, cocktail waitresses, waiters and bartenders who are not eligible for good driver status.
  • Mercury prematurely cancelled policies issued to people entitled to buy inexpensive policies under the Low Cost Automobile Insurance Plan – even though Mercury claims that the availability of such policies will lessen the impact that Prop 17 will have on uninsured motorists.

In addition to illegal overcharging of its customers and other misbehavior by the company identified by the CDI, Mercury Insurance has consistently received among the lowest J.D. Power rankings among large insurers. In the most recent survey, Mercury was ranked 27 of 32 companies in terms of overall customer satisfaction.


SOURCE Consumer Watchdog