Mercury Insurance ordered to pay $27.5 million fine
News: 2015 Press Release
SACRAMENTO, Calif. - Insurance Commissioner Dave Jones ordered Mercury Insurance to pay a fine of $27,593,562 million because Mercury auto insurance consumers were charged unapproved "broker fees." Mercury did not obtain the commissioner's approval for the "broker fees" and so consumers paid more than the rates approved by the commissioner. Proposition 103, passed by the voters in 1988, prevents auto insurers from charging excessive rates and requires that rates be approved by the commissioner.
Despite being advised against doing so by the Department of Insurance, from 1999 through 2004, Mercury's insurance agents charged and collected unapproved "broker fees" on more than 180,000 transactions, improperly collecting $27,593,562 million from consumers.
"Mercury auto insurance consumers paid $27.5 million in unapproved fees," said Commissioner Jones. "While the $27.5 million fine against Mercury is significant, it is commensurate with the amount of money that was unlawfully collected from Mercury policyholders."
The commissioner's decision comes after an exhaustive process that included a full evidentiary hearing conducted by an administrative law judge. The hearing included 15 days of testimony, extensive exhibits and legal briefs. The administrative law judge found that there were at least 180,000 transactions in which Mercury auto policyholders were charged fees that had not been approved. After all of the evidence and legal arguments were considered, the administrative law judge recommended the commissioner impose the $27.5 million fine on Mercury.
Media Notes: "broker fees": Brokers are allowed to charge fees. But in this case, those who were identified as brokers were actually functioning as agents, and therefore, their fees had to be filed as part of Mercury's rate filing and approved by the commissioner, which Mercury failed to do.
- Copy of the proposed decision is available to the public.
- Copy of the order is available to the public.
Led by Insurance Commissioner Ricardo Lara, the California Department of Insurance is the consumer protection agency for the nation's largest insurance marketplace and safeguards all of the state’s consumers by fairly regulating the insurance industry. Under the Commissioner’s direction, the Department uses its authority to protect Californians from insurance rates that are excessive, inadequate, or unfairly discriminatory, oversee insurer solvency to pay claims, set standards for agents and broker licensing, perform market conduct reviews of insurance companies, resolve consumer complaints, and investigate and prosecute insurance fraud. Consumers are urged to call 1-800-927-4357 with any questions or contact us at www.insurance.ca.gov via webform or online chat. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.
