Mercury Insurance May Have Illegally Overcharged Consumers, Regulator Says

A California Department of Insurance examination has found that Mercury Insurance violated the state insurance statutes and as a result, the company may have illegally overcharged thousands of Californians for auto and homeowners insurance.

“In addition, the Department’s examination finds that Mercury Insurance has apparently continued to violate the law despite agreements with the state to terminate its illegal behavior,” Insurance Commissioner Steve Poizner said.

CDI conducted a Market Conduct Exam covering March 1, 2007, to May 31, 2007. During that period, it found that Mercury Insurance Group, comprising Mercury Insurance Co., Mercury Casualty Co. and California Automobile Insurance Co., violated the insurance code, resulting in consumers being overcharged or denied coverage. Among the 35 categories of alleged violations are:

• Mercury Insurance failed to correct law violations identified in DOI exams conducted in 1998 and 2002.
• Mercury did not collect the right information about a driver’s prior accidents to ensure that surcharges are only applied for those accidents where the insured is at fault, and to ensure people are not charged for bodily injury accidents when no injuries had occurred.
• Homeowners’ insurance premium credits were not being consistently applied when they were due, resulting in insureds being overcharged.
• Auto insurance underwriting guidelines required individuals with certain medical impairments to undergo additional underwriting scrutiny before a policy could be issued.
• Mercury barred from coverage people in certain occupations — bartender, liquor store owner, painter, cocktail waitress/waiter and artists — who didn’t meet additional underwriting standards that were not applied to people in other occupations.

Mercury Insurance Group has 10 days to correct each violation found in the latest exam. The company faces a fine for each violation that isn’t corrected and an additional fine if the violation is found to be willful. The insurer also faces additional penalties for past violations, as well as for its failure to implement corrections following the previous exam, the DOI said.