Proposition 17, the Continuous Coverage Auto Insurance Discount Act, sounds too good to be true. It indeed might be. This act allows consumers to qualify for a continuous coverage discount while still shopping around for the lowest rate, promoting competition in the free market. What's the hitch? Like Proposition 16, it's entirely backed by one company, in this case, Mercury Insurance. For some, this sends up red flags.

According to Mike D'Arelli, executive director of Alliance of Insurance Agents and Brokers and an advocate for Prop. 17, Mercury Insurance is supporting and funding Prop. 17 because it gives them the opportunity to offer consumers a better deal. "Ninety-five percent of customers who go to Mercury stay with Mercury," says D'Arelli. "They're a fierce competitor, and they want to give the consumer what they want: choice and competition."

Relying on key words like "money-saving," "lower rates," "competition" and "choice," the argument in favor of Prop. 17 sounds convincing but, as written, leaves out some important information. Prop. 17 is not entirely about the discounts. This legislation has long-term effects that can be described by a few key words like "surcharges," "financial penalties" and "coverage history."

The allure of Prop. 17 is that consumers who choose to switch insurers can keep their continuous coverage discount and take it with them, saving up to $250 a year. At first glance, Prop. 17 doesn't sound so bad. It promises added protections, including a 90-day grace period if drivers lapse on their car insurance payments. Under current law, if drivers qualify for the continuous coverage discount, meaning they have maintained the same insurer for at least 12 months beyond their initial policy term, and then switch insurers, they cannot take that discount with them to a new company. Such a discount is made portable with Prop. 17. As D'Arelli, says, "It's hard for me to understand how in good faith someone can oppose this."

Opponents argue that supporters have misled voters using language about discounts and money savings in their initiative, but that Prop. 17 is not about discounts. Doug Heller, the executive director of Consumer Watchdog, encourages voters to ask themselves when the last time a big insurance company spent millions to help consumers save money? The answer is simple. "Insurance companies don't put things on the ballot that are going to help the consumer; they do things to help themselves," Heller charges. "Prop. 17 is entirely backed by Mercury Insurance, and changes the law to favor big insurance companies."

If passed, insurance companies would be permitted to ask a consumer for proof of auto insurance for the last five years without any lapse over 90 days, even if he or she hadn't been driving during that time. If the consumer can't prove coverage, an automatic penalty of up to $1,000 could be added to the premium. Penalties based on coverage history were made illegal in 1988 by voters as a discriminatory practice.

"[Mercury] has taken a consumer protection in California law, and they're attempting to throw it out using confusing language about discounts," Heller says. "Prop. 17 isn't about the discounts; it's about getting rid of the consumer protection. College students who don't have a car, soldiers who live on base and people who lost their job or had to cut costs are all going to be forced to pay this surcharge when they reinstate their coverage."

Because of the $1,000 penalty, it can be assumed that the amount of uninsured drivers on the road will increase, costing everyone more money. "In the wake of recession, millions have stopped driving temporarily to cut their costs of auto insurance," Heller says. "At this time and in this economy, it's going to be much more difficult for people to get back into the insurance market if they have to face a $1,000 penalty."

D'Arelli defends the proposition, saying, "The opponents are using fear-mongering scare tactics. The fact is that between 1996 and 2002 the rate of uninsured drivers dropped from 28.6 to 13.1 percent because California allowed companies to provide drivers with this discount."

Prop. 17 supporters say the current law restricts drivers from shopping around for auto insurance and limits competition in the free market. It is estimated that 82 percent of California drivers currently qualify for the continuous coverage discounts and tend to stay with their insurance company to maintain their discount. The portable continuous coverage discount would help drivers maintain this discount while switching carriers. "Mercury Insurance supports Prop. 17 because they're investing in their growth," D'Arelli says. "The only way their going to grow is if they help the consumer."

Heller points out hidden loopholes in the Prop. 17 protections that make this a bad choice for consumers. "The protections that are promised in 17 are misleading," says Heller. "A combined 90 days over a five-year period is not protection, no matter what way you look at it."

Opponents see Prop. 17 as a way to make insurance companies less accountable while giving them the ability to raise premiums and add penalties. As June 8 draws near, supporters are hunkering down. "The ballot box is the purest form of democracy," says D'Arelli. "The ballot box is you and I."

For his part, Heller says that the most important thing for the voters to consider when they go to the polls is to remember that "the damage Prop. 17 would do is amplified by the bad economy."

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