California Insurance Commissioner: Mercury Steered ‘Good Drivers’ Toward Higher-Priced Policies
California Insurance Commissioner Ricardo Lara announced a legal action on Monday against Mercury Insurance for reportedly violating consumer protection laws, including selling Mercury’s highest-priced policy to “good drivers” instead of the lowest-priced policy for which good drivers qualify.
Lara’s action follows a California Department of Insurance investigation that reportedly found numerous areas where Mercury’s business practices harmed policyholders across its private passenger auto, homeowners, commercial auto and commercial multi-policy lines of insurance.
Proposition 103 passed in 1988 by California voters mandated a 20% “good driver discount” for consumers who maintain a safe driving record. The CDI’s investigation reportedly found that Mercury attempted to evade the requirements of Prop 103 by steering good drivers into a higher-priced plan.
Mercury maintains two insurers in California: Mercury Insurance Co., which charges lower rates for good drivers, and California Automobile Insurance Co., which charges higher rates and insures all drivers.
The investigation reportedly found numerous ways Mercury illegally “steered” drivers to its company with the higher-priced plan, including:
- Directing agents to provide quotes in its higher-priced plan using artificially low mileage, giving the appearance of lower rates in order to entice consumers.
- Directing its agents to refuse to sell a lower-priced policy if a good driver had been cancelled for non-payment of premium or had an accident for which the driver was not at fault, neither of which is allowed under law.
- Only offering a monthly payment option in the higher-priced plan.
- Dissuading good drivers from switching to the lower-priced plan with misleading language for the nearly identical plans.
- Falsely representing that both plans charge policy fees, when in fact only the higher priced plan charged policy fees.
- Subjecting good drivers without prior coverage to different terms and conditions than other drivers.
The CDI also alleges Mercury overcharged businesses and homeowners in other lines of insurance through a variety of illegal practices that resulted in unfairly discriminatory rates.
Mercury in an emailed response to a request for comment said the company has been working with the CDI to address the concerns, and despite Mercury’s belief that it has not violated any laws, it has implemented operational changes at the request of the CDI.
“Mercury Insurance strongly disagrees with the allegations presented in the August 1, 2022, California Department of Insurance (CDI) press release announcing an administrative enforcement action (a “Notice of Non-Compliance”) against Mercury Insurance,” the statement reads. “Mercury Insurance will continue to work with the DOI in order to resolve any outstanding issues and settle the matter, but if that is not possible it will defend itself through the judicial process.”
In 2019, Mercury ended a two-decade long battle with the CDI in a battle over the Los Angeles-based carrier improperly tacking fees onto auto insurance policies and over false advertising claims.
The company paid a $27.6 million penalty plus $8.1 million interest, making it reportedly the largest property/casualty payment in CDI history.
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