Mercury Insurance is being ordered to pay a large fine for wrongful fees issued to consumers
The California Department of Insurance has ordered Mercury Insurance, one of the state’s largest auto insurance providers, to pay some $27.6 million in fines for allegedly charging consumers wrongful fees. This represents the largest fine issued against an auto insurance company in the state. Insurance Commissioner Dave Jones ordered the fine, accusing the insurer of charging broker fees that it did not approve of to begin with. Mercury Insurance believes that the fine is against the basic notion of fairness.
Mercury opposes the fine being issued by the Department of Insurance
Mercury president Gabriel Tirador claims that the fine issued against the company is contrary to California’s insurance rate laws and due process. The company is expected to challenge the fine on legal grounds, but the timeframe in which the issue will receive legal attention is not yet clear. The fine may have some impact on insurance rates provided by the company in the future, as it represents a significant loss if the company should be forced to pay the fine.
Insurance Commissioner has the power to approve or reject rate proposals from auto insurers
The state’s Insurance Commissioner has the power to approve and reject auto insurance rate proposals, per Proposition 103, which was passed in 1988. State regulators have been policing insurance rates somewhat aggressively in recent years, claiming that some companies are proposing rate increases that are not financially feasible for many consumers. Higher rates introduce more financial strain for consumers, which is often considered a poor practice in times of economic hardship. Nonetheless, insurers have cited increasing costs and losses as the reason that rates need to be increased.
Wrongful fees may have been a part of 180,000 insurance transactions made in the state
Some auto insurers have been accused of charging wrongful fees on policies in the past, but these issues saw resolution relatively quickly. In the case of Mercury Insurance, California Insurance Commissioner Dave Jones suggests that some 180,000 insurance transactions from across the state were hit by wrongful fees. The large fine issued against the insurer could draw more attention to the practices being employed in the auto insurance sector.