California Offers Low-Cost Auto Insurance to Poor Motorists

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CNN — The World Today

JIM MORET, CNN ANCHOR: While you’re on the crowded highways this weekend, you might stop to consider whether the drivers around you have insurance. California has one of the highest estimates of uninsured drivers, 26 percent. It’s trying something different to solve that problem.

CNN’s Tony Clark explains.


TONY CLARK, CNN CORRESPONDENT (voice-over): Sixty-six-year-old Grace Luna has to pay more than $850 per year for insurance, and that’s just for minimal coverage on her 1980 Chevy Citation.

GRACE LUNA: It wasn’t fair, you know, that they keep charging us so much. And I need the money for my grandchildren to buy milk,

bread, you know, groceries.

CLARK: Luna is one of up to 200,000 low-income residents in Los Angeles who pay high insurance premiums because they live in poor, inner-city neighborhoods. In addition, there are an estimated half- million motorists in Los Angeles who drive without any insurance, even though it’s required by state law.

DOUGLAS HELLER, CONSUMER ADVOCATE: For years, the poor people of Los Angeles County were between the rock and a hard place of having to buy insurance but simply not being able to afford it.

CLARK: Under a four-year state-mandated pilot project called Lifeline, insurance companies will now sell low-cost, basic coverage policies to low-income motorists in Los Angeles and San Francisco.

While only households with good driving records and gross incomes equal or below 150 percent of the federal poverty level qualify for the program, consumer rights advocates say everyone will benefit from it.

HELLER: Every one of us will pay lower insurance rates, because when more people buy into the system, the rates go down. This has a benefit. That’s the secret gift of the Lifeline low-cost auto policy.

CLARK: In Grace Luna’s case, her insurance bill will be cut about in half, to $450 a year.

LUNA: We’re going to have more money to buy groceries, and we can buy even a television or a microwave, you know?

CLARK: California is the first state to adopt the low-cost insurance plan for the poor.

(on camera): If the insurance plan is successful here, officials in other states say they may adopt similar insurance plans for their state as well.

Tony Clark, CNN, Los Angeles.

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