Bill expands cheap car insurance plan;

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SCHWARZENEGGER: If it’s signed, low-income Inland drivers would be able to buy inexpensive coverage.

Press Enterprise (Riverside, CA)

SACRAMENTO, CA – Low-income motorists with good driving records in Riverside and
San Bernardino counties will be able to buy cheap auto insurance by spring if Gov. Schwarzenegger signs a bill on his desk.

The measure, which passed the Legislature last week, would expand to eight counties a state program that has offered low-cost auto insurance in Los Angeles and San Francisco
counties for the past five years.

Proponents say the bill by state Sen. Martha Escutia, D-Whittier, will reduce the number of uninsured vehicles, as well as encourage more residents to comply with a 1997 law requiring proof of insurance to drive.

“For most low-income working people, not driving is not an option,” said Doug Heller of the Foundation for Taxpayer and Consumer Rights, a Santa Monica-based group that supported the bill. “So long as we’re going to require that people buy auto insurance, we have to come up with a way for folks to afford it.”

Rates paid by participants in the program are expected to cover any claims. Under state law, other insurance customers’ premiums cannot subsidize the low-cost policies.

But the insurance industry, which tried to block the 1999 legislation creating the two-county pilot project, remains skeptical of the low-cost program.

Some industry officials question its effectiveness. The two-county test project has generated 17,000 policies — a tiny fraction of the number of registered vehicles in Los Angeles and San Francisco counties.

There also are concerns about the level of insurance provided by the program. State law requires drivers to carry at least $15,000 in coverage for bodily injury or death to one person, $30,000 in coverage for injury or death to more than one person, and $5,000 for
damage to property.

For participants in the low-cost program, however, the three coverage requirements would drop to $ 10,000, $ 20,000 and $ 3,000.

“I think there is a public policy issue of whether that’s an appropriate level of coverage for consumers,” said Sam Sorich, president of the Association of California Insurance Companies.

“On one hand, it has the potential to reduce the number of uninsured drivers, but on the other hand could increase number of under-insured drivers,” he said.

Schwarzenegger has until Oct. 9 to act on bills.

Charles Walton, a Riverside insurance broker, said the program ignores the root cause of uninsured and under-insured motorists — people don’t want to spend money on something they may never need.

“If people shop, they can find something affordable. To say that low-cost insurance is going to solve the problem sounds good, but it doesn’t,” Walton said. Some motorists, Walton added, only buy insurance to register their vehicles and then cancel their policies or let them lapse. “Some people are scofflaws,” he said.

In 2000, the most recent data available, the state Department of Insurance reported there were 1.56 million insured vehicles in Riverside County and 1.59 million insured vehicles in San Bernardino County.

It’s unknown, though, how many of those vehicles lost their insurance coverage after registration, or how many uninsured vehicles that were never registered in the first place.

According to Escutia’s office, 1,303 San Bernardino County residents and 586 Riverside County residents expressed interest in the low-cost auto insurance as of 2003.

Yet there are concerns about participation in the program. Much of the interest in the Los Angeles and San Francisco insurance came in 2004, after state agencies increased efforts to publicize the program.

Similar issues could undermine the proposal to expand the program to cover Riverside and San Bernardino counties, supporters warn.

Another bill being considered by Schwarzenegger would help pay for a marketing campaign for the low-cost program.

If Schwarzenegger signs the expansion bill but vetoes the funding measure – which drew nearly unanimous opposition from the governor’s fellow Republicans in the Legislature — there would be little money to publicize the cheaper auto insurance options.

“To make this program a success, it’s going to be important that drivers in Riverside County and throughout the state know that it exists,” said Heller, from the consumer-rights group.

The low-cost program would end in 2011 unless extended by the Legislature. Other counties that would be included in the expansion are Orange, San Diego, Fresno and Alameda counties.
Insurance rates under a pilot low-cost auto insurance program:
LOS ANGELES COUNTY: $ 347 per year
SAN FRANCISCO COUNTY: $ 314 per year
AGE: Participants must be 19 or older, with three years of driving experience.
OFFENSES: Participants must have no at-fault accidents or serious traffic offenses in the last three years.
VEHICLES: Insured vehicles cannot cost more than $ 20,000.
INCOME: Participants’ income must be less than 250 percent of federal poverty level, amounting to  $ 48,375 for a four-person household.

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