Associated Press
SACRAMENTO — The Assembly approved auto insurance legislation Thursday that would let insurers offer discounts for longtime customers, despite arguments that it would hurt many low-income drivers and invite a lawsuit.
The bill, by Sen. Don Perata, D-Oakland, would allow auto insurers to offer “persistency discounts” to try to lure longtime customers away from their competitors.
Gov. Gray Davis vetoed a nearly identical bill last year at the urging of then-Insurance Commissioner Harry Low. The current insurance commissioner, John Garamendi, also opposes to the bill.
Davis’ spokesman Russ Lopez said the governor hasn’t taken a position on this bill.
The Assembly approved the bill 55-13. It now goes back to the Senate for approval of Assembly amendments.
The Department of Insurance already allows insurers to offer their longtime customers discounts, supporters said. The bill would spark competition as motorists shop around for the lowest insurance rates.
“Persistency rewards those drivers that drive well,” said Assemblyman Ed Chavez, D-La Puente. “It allows them to shop around, which creates competition in the marketplace for lower rates. That’s good for business. That’s good for consumers.”
But opponents say the bill would violate Proposition 103‘s ban on basing rates on lack of prior insurance and would result in higher premiums for drivers who have gaps in their coverage. Those drivers are often among the poorest in the state, they said.
The bill only worked, said Assemblywoman Jackie Goldberg, D-Los Angeles, “if you believe that the insurance companies are willing to take less profit in order to provide you this discount.”
Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights, said the bill could result in higher rates for the customer with a gap in coverage.
The bill would allow people to qualify for persistency discounts even though they had a two-year gap in coverage because they were out of the state for military service. Other motorists would only be allowed a 90-day coverage gap in the previous five years to qualify for the discounts.
That means Peace Corps volunteers, students studying abroad and people who are hospitalized or otherwise unable to drive for extended amounts of time would pay more for insurance, Court said.
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On the Net: Read the bill, SB841, at: http://www.senate.ca.gov
The Foundation for Taxpayers and Consumers Rights (FTCR): http://www.consumerwatchdog.org
