California’s Proposition 103 gives California consumers powerful protection against insurance company abuses. It applies to auto insurance, homeowners and renters insurance, business insurance and other forms of liability and property insurance.
Insurance companies all too frequently violate provisions of Proposition 103. It pays to know your rights!
This page summarizes your rights under Proposition 103 in simple terms. From here, you can study Proposition 103’s provisions in great detail. Links from each consumer protection contained in Proposition 103 will take you to a new page, which contains the actual language of the law approved by the voters and source materials, including legal briefs and court decisions.
Whether you are a consumer or a lawyer representing consumers, this information will explain how you can take advantage of your rights under Proposition 103.
LOWER RATES: Auto, home and business insurance rates cannot be excessive.
Rates determine the total amount of money an insurance company can collect for each kind of coverage they sell. Insurance companies are now required to charge rates that are not “excessive” in light of their profits and investment income. The expenses they pass through in the rates they charge must be reasonable. The California Department of Insurance is required to review rate increase (and decrease) requests and approve rates before they take effect. You have the right to review those rates and also challenge them (see below).
NOTE: Rates are different than premiums. Premiums are what you pay, according to the overall rate approved by the Department of Insurance. Proposition 103 also limits how insurers set and change your premiums (read more below).
FAIR PREMIUMS. Your auto insurance premiums must be based on your driving safety record, your annual mileage, and your years of driving experience.
Proposition 103 forces insurers to base premiums primarily upon factors within your control, rather than upon where you live. Insurers continued to base your rates primarily upon your zip code — a practice known as “territorial rating” — thanks to a Court of Appeal decision which refused to enforce 103. However a new insurance commissioner ultimately drafted regulations which properly enforce 103.
20% GOOD DRIVER DISCOUNT: If you are a good driver, you are entitled to a 20% Good Driver Discount – even if you did not previously have insurance.
You qualify for the Good Driver Discount if you have a clean driving record. And the insurance company has to give you their best deal.
RIGHT TO GOOD DRIVER POLICY: If you are a good driver, you are entitled to buy an auto insurance policy from any insurance company you choose – all you have to do is call them.
Insurance companies don’t have offices in every neighborhood in California. In fact, insurance companies often deliberately avoid selling insurance in certain neighborhoods. This practice is known as “redlining.” But under Proposition 103, it doesn’t make a difference where you live: if you are a qualified good driver, you can call any insurance company doing business in California – or an insurance agent representing that company — and the insurer must sell you a Good Driver policy at a 20% discount.
NO SURCHARGES IF YOU WERE NOT AT FAULT IN AN ACCIDENT: Your insurance company cannot raise your rates just because you got into an accident, as long as it was not your fault.
Many motorists are afraid to file a claim even if the accident was not their fault. Proposition 103 protects you.
NO ARBITRARY CANCELLATIONS OR NON-RENEWALS: You are protected against arbitrary cancellations or non-renewal of your auto insurance policy.
Your auto insurance company cannot cancel or refuse to renew your auto insurance policy except for three reasons: you didn’t pay your premium; you engaged in fraud/misrepresentation concerning the policy; or because of “a substantial increase in the hazard insured against.”
NO PRIOR INSURANCE: You are protected against penalties just because you did not previously have auto insurance.
Your auto insurance company cannot surcharge you or charge you a different rate just because you weren’t insured before, or had a lapse in coverage.
GROUP POLICIES: You can negotiate a low-cost group insurance policy for your automobile, home or business.
Big policyholders (large corporations, for example) have always been able to negotiate discounted policies. Proposition 103 allows individual consumers to band together to negotiate group policies.
DISCOUNT COMMISSIONS: You can save money by negotiating with your insurance broker to cut his or her commission.
Sales commissions on insurance policies can be very substantial – anywhere from 5% to 50% of your policy, depending on the kind of insurance. Large customers have always been able to negotiate discounts. But in the old days, insurance agents used to be prohibited by law from reducing their commissions to give individual consumers a discount. (They backed that law!). But 103 repealed it and now you can negotiate better deals.
CHALLENGING INSURANCE COMPANIES’ RATES OR PRACTICES: You can challenge an insurance company’s rates for being too high.
Under 103, any member of the public may challenge an insurance company’s application for a rate increase or change, or challenge an insurance company’s current rates, practices or procedures. These challenges are filed with the California Department of Insurance. In certain situations – when an insurance company requests a rate increase of 7% or more – the CDI must hold a hearing on your request.
VIOLATION OF YOUR RIGHTS: You can sue an insurance company for violating Prop. 103.
Under Proposition 103, you have the right to go to court to challenge an insurance company’s violation of the law – whether the rights that have been violated are your own, or those of the public at large.
INTERVENE IN LAWSUITS, DEPARTMENT OF INSURANCE HEARINGS: You can intervene in all insurance matters before the California Department of Insurance and the courts.
REIMBURSEMENT OF LEGAL COSTS: You can get your attorneys fees and expenses paid by the insurance companies, the Department of Insurance and/or the courts under certain circumstances.
Proposition 103 was written to encourage public participation in the implementation and enforcement of the insurance laws. When you take advantage of your right to participate in insurance matters, either in the courts or before the California Department of Insurance, you may be entitled to reimbursement of your legal costs.
FULL DISCLOSURE: You have the right to obtain information about the insurance companies’ rates and practices.
The California Department of Insurance is required to publicly disclose all documents filed by insurance companies with the agency pursuant to Proposition 103.
REFUNDS: Rate rollbacks and refunds required by Proposition 103.
Proposition 103 mandated a one-year rollback of rates when it passed in 1988, and then an additional 20% reduction. Most insurers initially refused to comply, but after unsuccessful legal challenges, agreed to pay a total of $1.2 billion.
THE LEGISLATURE AND PROP. 103: The Legislature is not allowed to rewrite Proposition 103 in any way that undermines its protections.
Proposition 103 was necessary because the California Legislature was too beholden to the insurance industry and refused to pass needed reforms. To protect itself against the insurance lobby once it became law, Proposition 103 specifically prohibits the Legislature from hostile amendments. That hasn’t stopped the Legislature from trying, though.
IMPORTANT NOTE: Insurance companies all too frequently violate provisions of Proposition 103. Consumer Watchdog monitors the insurance industry and the California Department of Insurance and we take action to make sure the law is obeyed. Contact us if you believe you have experienced or uncovered a violation of the law. Many attorneys are unaware of some provisions of Proposition 103. If you are represented by an attorney, they may call us for more information.
WHAT TO DO IF YOU DON’T LIVE IN CALIFORNIA: Download a copy of Proposition 103 and urge your elected officials to sponsor similar legislation in your state.