Auto Insurance Reform for the Poor

Published on

Los Angeles Times

All California motorists are required to carry auto insurance, but more than 3 million drive uninsured, either dropping coverage as soon as their cars are registered or driving without registration. Most are flouting the law because they can’t afford to comply.

Insurance rates are astronomical in many urban areas. Take the 90044 ZIP Code area in South-Central Los Angeles, where the per capita income is $7,299 and the average premium for minimum coverage for drivers with good records is $1,882, according to state records cited by proponents of reform. Policies are cheaper in rural areas and suburbs, but that is little help to 90044 and places like it.

The Legislature is expected to renew the mandatory auto insurance law before it expires in 2000. Sen. Martha Escutia (D-Whittier) argues that the extension should be accompanied by insurance reform. She has proposed a so-called lifeline insurance policy costing $ 300 a year for drivers with clean records and incomes under about $ 20,000. The liability limits would be only $ 10,000 per person and $ 20,000 per accident, but still enough to cover most accidents. Escutia’s bill is at least a good starting point.

The insurance industry opposes the measure, arguing that it is tantamount to a subsidy and would drive up the cost of auto insurance for everyone else. The bill’s initiator, the Foundation for Taxpayer and Consumer Rights, and backers respond that the policies would pay their own way and would eventually lower rates by reducing the ranks of uninsured drivers.

Insurance Commissioner Chuck Quackenbush says he endorses the idea of low-cost coverage but does not favor Escutia’s approach. His office says he will negotiate with insurers to reduce the cost of a basic policy15% by restricting it to one driver for any car. No language for legislation has been proposed yet, but this notion would seem to pose a hardship for a large family–or even a couple–with one vehicle. It also apparently fails to diminish huge price differences among ZIP Code areas.

The insurance commissioner and the insurance industry should by all means respond to Escutia’s measure with detailed proposals of their own. But no one can argue that it’s wise to push so many otherwise law-abiding drivers into criminality.

Consumer Watchdog
Consumer Watchdog
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