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Smart Voter
State of California June 8, 2010 Election
Proposition 17
Allows Auto Insurance Companies to Base Their Prices in Part on a Driver's History of Insurance Coverage
State of California

Initiative Statute - Put on the Ballot by Petition Signatures - Majority Approval Required

Fail: 2,491,026 / 48.2% Yes votes ...... 2,672,729 / 51.8% No votes

See Also: Index of all Propositions

Results as of Jun 29 4:19pm, 100.0% of Precincts Reporting (22894/22894)
Information shown below: Summary | Fiscal Impact | Yes/No Meaning | Impartial Analysis | Arguments |

Should insurance companies be permitted to reduce or increase the cost of auto insurance depending on whether a driver has a history of continuous insurance coverage?

Summary Prepared by the State Attorney General:

  • Changes current law to permit insurance companies to offer a discount to drivers who have continuously maintained their auto insurance coverage, even if they change their insurance company.
  • Will allow insurance companies to increase cost of insurance to drivers who do not have a history of continuous insurance coverage.
  • Establishes that lapses in coverage due to nonpayment of premiums may prevent a driver from qualifying for the discount.

Fiscal Impact from the Legislative Analyst:
Probably no significant fiscal effect on state insurance premium tax revenues.

Meaning of Voting Yes/No
A YES vote on this measure means:
Insurance companies could offer new customers a discount on their automobile insurance premiums based on the length of time the customer had maintained bodily injury liability coverage with another insurer.

A NO vote on this measure means:
Insurers could provide discounts to their long-term automobile insurance customers, but would continue to be prohibited from providing such discounts to new customers switching from other insurers.

Impartial Analysis from the Legislative Analyst

Also Available in Audio Version [MP3]

Automobile insurance is one of the major types of insurance purchased by California residents. It accounted for about $19.7 billion (36 percent) of all premiums collected by California insurers in 2008. Among the types of automobile insurance coverage available is bodily injury liability, which provides protection in the event a motorist physically injures someone else.

State Regulation of Automobile Insurance. In 1988, California voters passed Proposition 103, which requires the Insurance Commissioner to review and approve rate changes for certain types of insurance, including automobile insurance, before changes to the rates can take effect. Proposition 103 also requires that rates and premiums for automobile insurance policies be set by applying the following rating factors in decreasing order of importance: (1) the insured's driving safety record, (2) the number of miles they drive each year, and (3) the number of years they have been driving.

The Insurance Commissioner may adopt additional rating factors to determine automobile rates and premiums. Currently, 16 optional rating factors may be used for these purposes. For example, insurance companies may provide discounts to individuals for being long-term customers of theirs. Insurance companies are prohibited, however, from offering this kind of discount to new customers who switch to them from other insurers.

In addition, Proposition 103 contains a provision related to individuals who were previously uninsured. Specifically, Proposition 103 prohibits insurance companies from using the information that an individual did not previously have automobile insurance to: (1) determine whether the individual is eligible for coverage or (2) decide the premiums charged for coverage.

Insurance Premium Tax. Insurance companies doing business in California currently pay an insurance premium tax instead of the state corporate income tax. The tax is based on the amount of insurance premiums earned in the state each year for automobile insurance as well as for other types of insurance coverage. In 2008, insurance companies paid about $247 million in premium tax revenues on automobile policies in California. These revenues are deposited into the state General Fund.


This measure amends Proposition 103 to allow an insurance company to offer a "continuous coverage" discount on automobile insurance policies to new customers who switch their coverage from another insurer. If an insurance company chooses to provide such a discount, it must be based on the length of time the customer continuously had bodily injury liability coverage. Customers would generally be eligible for this discount so long as their coverage had not lapsed for more than 90 days in the past five years, except if any lapse was the result of a failure to pay the premium. Also, customers would still be eligible for this kind of discount under the measure if a lapse in coverage was due to military service in another country. Children residing with a parent could qualify for the discount based on their parent's eligibility.

Fiscal Effects

This measure could result in a change in the total amount of automobile insurance premiums earned by insurance companies in California and, therefore, the amount of premium tax revenues received by the state for the reasons discussed below.

On the one hand, the provision of continuous coverage discounts could reduce premium tax revenues received by the state. This would depend, however, on the extent to which insurers choose to offer such discounts to their customers, and the size of the discounts provided. On the other hand, insurers offering such discounts could make up for some or all of these discounts by charging higher premiums to some of its other customers.

The net impact on state premium tax revenues from this measure would probably not be significant. This is because overall premiums are predominately determined by other factors--such as driver safety, the number of miles driven, and years of driving experience--which are unaffected by the measure.

Arguments Submitted to the Secretary of State

Summary of Arguments FOR Proposition 17:
Yes on 17 can save insured drivers up to $250 by eliminating a surcharge for changing insurance companies. 17 allows insured drivers to take continuous coverage discounts with them if they change insurers, just like good driver discounts. A flaw in California law prevents this. 17 saves consumers money.

Summary of Arguments AGAINST Proposition 17:
Mercury Insurance is spending millions on Proposition 17 so auto insurance companies can RAISE PREMIUMS AS MUCH AS $1,000 on good drivers. It reverses a voter-approved law and allows new insurance surcharges that will harm middle-class families and lead to more uninsured motorists. Consumer advocates OPPOSE Prop. 17.
Contact FOR Proposition 17:
Yes on 17-Californians for Fair Auto Insurance Rates
(916) 325-0056

Contact AGAINST Proposition 17:
Campaign for Consumer Rights
(310) 392-0522

  What is Prop 17?

Video Overview

League of Women Voters of California Education Fund
  • Easy Voter Guide - brief summary of Prop 17
  • Pros and Cons - a nonpartisan explanation of this state proposition, with supporting and opposing arguments. Also available in Spanish (PDF)
Public Radio Debate/Discussion Campaign Finance Data

Secretary of State

Official Voter Information Guide

Secretary of State

Legislative Analyst's Office Additional Information

From Other Organizations

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Created: August 20, 2010 21:46 PDT
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