California sues Mercury Insurance, alleges it overcharged, misled drivers and homeowners

CALIFORNIA, (KTXL) — The California Department of Insurance began legal action against Mercury Insurance on Monday, alleging the company pushes “good drivers” away from lower insurance options that they qualify for.

The department said that an investigation found that private car owners, homeowners, commercial car owners and commercial multi-policy customers were being harmed by the company’s practices.

“Failing to sell good drivers the lowest priced policy for which they qualify is illegal, and my Department will act on behalf of consumers and pursue the maximum penalties against Mercury for acting in bad faith,” said Insurance Commissioner Ricardo Lara.

“My message to Mercury and other insurance companies that try to evade the law is clear: unfair and illegal practices will not be tolerated and I will fight to ensure consumers get the discounts they are entitled to under the law.”

The department said that Mercury allegedly failed to follow California Proposition 103, which mandated a 20% “good driver discount” for drivers that have a safe driving record.

According to the department, Mercury runs two insurance companies, Mercury Insurance Company (MIC) and California Automobile Insurance Company (CAIC).

MIC is exclusively for “good drivers” and charges lower rates, according to the department, and CAIC charges higher-rates for very similar coverage to MIC.

According to the department’s investigation, Mercury used the following tactics to get drivers to buy a higher-priced plan.

• 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, including using language such as “an [MIC] policy may be offered for a lower premium, but also provides somewhat less coverage and more restrictive payment options than the [CAIC] policy you currently have.”
• 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.

Mercury was also found during the course of the investigation to:

• Raise premium rates on commercial drivers that were in accidents where they were not at fault
• Treating drivers as new drivers because they were not the named policyholder with another company for two years.

There were more than 20 allegations against Mercury in this case, according to case records.