Last week, a court in California ruled against Mercury Insurance Company which challenged an earlier order from the California Insurance Commissioner requiring it to reduce homeowner insurance rates. In that same lawsuit, various insurance industry trade associations intervened to separately challenge certain laws that regulate what advertising costs insurance companies can pass onto consumers.1
Yes, if you didn’t know already, insurance companies (at least in California) can include certain advertising expenses in setting rates to charge to their policyholders. What is prohibited however is "institutional advertising" which is "advertising not aimed at obtaining business for a specific insurer and not providing consumers with information pertinent to the decision whether to buy the insurer’s product."2 The trade associations argued without success that excluding "institutional advertising" for ratemaking purposes violated the First Amendment on commercial speech grounds. Luckily for California consumers, this particular court was not persuaded.
Well, what are some examples of "institutional advertising"? Corporate sponsorships of sporting events, purchases of luxury boxes at sporting venues, and insurer name branding on stadiums and arenas, to name a few.3
Here is a more specific example: Los Angeles (where I practice)—which has been without a professional football team for ages—recently gave the go ahead for constructing a stadium with the naming rights going to Farmers Insurance. The stadium when built would be named "Farmers Field." I’m not an expert on what it costs for such naming rights, but I’ve heard it’s definitely in the millions. I don’t think many Farmers policyholders would be too happy if part of the insurance premiums they pay went toward such an expense. Thankfully, there are regulations in place which prohibit this practice.
1 California Dept. of Insurance Press Release "Court rejects insurance industry challenge to Proposition 103 protections," January 21, 2015.
2 10 C.C.R. section 2644.10(f).
3 California Dept. of Insurance Press Release, January 21, 2015.