Proposition 103 (Section 1861.01 (a) of the California Insurance Code (CIC)), enacted in 1988, set current state law regarding automobile insurance rates and premiums for insurance policies. Rates and premiums are determined by the insured's driving record, the number of miles driven every year, and the number of years of the insured's driving experience. Under the law, the Insurance Commissioner can adopt additional factors that relate to the risk of an insurer having to pay claims for a loss suffered by an insured person. One of these factors is "persistency", which establishes the right of an insurer to reward long-term customers with discounts and other bonuses. New customers are barred from any persistency discount. The law also bars insurance companies assigning rates and premiums based on whether a customer did not previously have automobile insurance. Prop. 103 also established the requirement of all insurance companies in the state to pay an insurance premium tax instead of a corporate income tax. The tax is based on the amount of insurance premiums the insurer earned in the state each year for automobile insurance as well as other kinds of insurance.
Proposition 33 would allow an insurance company to offer a discount on automobile insurance policies to customers who switch their coverage from another insurance company. The measure requires the customer to have had "continuous coverage" with the previous insurer. A proportional basis would determine the discount based on the number of years in the previous five ears that the customer was insured.
Exemptions would be granted for customers who had a lapse in service if the lapse was no more than 90 days in the past five years, for nor more than 18 months in the last five years due to loss of employment from layoff, or in the case of active military service. Children, residing with a parent, would be eligible for the discount based on the eligibility of their parents.
Proposition 33 could change the tax revenues received by the state because of lower or higher rate of automobile insurance premiums earned by insurance companies.
Proposition 33 is similar to Proposition 17 which failed on the June 8th, 2010 ballot. That measure also offered a discount for new customers who had previously been insured by a different company. The measures differ in that Proposition 17 required that military personnel could only qualify for the discount if they were stationed overseas. Proposition 33 extends the discount to all military perssonel no matter where they are stationed. Proposition 33 also provides the discount to those who have been unemployed for 18 months from paying more after a lapse in coverage. Proposition 17 also did not include the discount for customers who lacked coverage due to layoff.