California Low Cost Auto insurance Program Surged Amid Recession, Outreach

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SACRAMENTO, CA — Enrollment in the California Low Cost Automobile Insurance Program surged 18.9% in 2009 due to the poor economy and an aggressive outreach program, the state Department of Insurance said.

The CLCA program approved 7,495 applications in 2009, up from 6,306 the previous year. April was the most active month, with 727 applications filed. Insurance Commissioner Steve Poizner conducted an outreach effort to attract uninsured motorists, the department said. The decade-old program expanded to every California county in 2007.

"I’m pleased to see that people are turning to California’s Low Cost Auto Insurance Program instead of putting themselves and others at financial risk. I encourage anybody who meets the eligibility criteria and who is thinking about dropping their insurance to take a look at the program that can keep them legally insured for as little as 15% down and very low installments payments," Poizner said in a statement.

Given the tough economy and a high statewide uninsured motorist rate, the state should continue to step up its efforts to grow the program, said Samuel Sorich, president of the Association of California Insurance Companies.

The CLCA program benefits insurers by lowering the number of uninsured motorists and providing a gateway to the insurance marketplace for lower-income Californians, Sorich said. The relatively small number of policies "is certainly not cannibalizing or undermining the voluntary market," he said.

Approximately 25% of the state’s drivers are not in compliance with a law requiring automobile insurance, state officials have said (BestWire, Oct. 13, 2009). Under the Low Cost Automobile Insurance Program, affordable liability insurance is offered to good drivers who earn an income that is up to 250% of the federal poverty level. For a family of four, the maximum income is $55,125.

For most drivers, the statutory minimum for levels of liability insurance are $15,000 for individual claims, $30,000 per incident and $10,000 in property damage. For CLCA drivers, the levels are $10,000; $20,000 and $3,000, Sorich said.

Last fall, Gov. Arnold Schwarzenegger vetoed bipartisan legislation that would have extended California’s Low Cost Auto Insurance Program for low-income families. Schwarzenegger said extending the program — currently to expire on Jan. 1, 2011 — through 2015 was premature. The governor questioned the effectiveness of the program, "given the number of policies in effect and low participation rate amongst the uninsured" (BestWire, Oct. 13, 2009).

According to Consumer Watchdog, nearly 49,000 had been purchased by California drivers through September 2009. Between 80% to 96% of those drivers were uninsured prior to enrolling (BestWire, Oct. 13, 2009).

Contact the author, Sean P. Carr, Washington Correspondent, at: [email protected]

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