LOS ANGELES — State Legislators received testimony today from consumer groups and advocates for the poor about the implementation of the recently enacted Lifeline auto insurance plan which will be tested in Los Angeles and San Francisco counties. The program, the first of its kind in the nation, requires all auto insurance companies to underwrite a low-cost policy for qualifying low-income drivers.
“There has not been a more significant shift towards consumer protection and equity since 1988 when voters passed Proposition 103,” said Harvey Rosenfield, President of The Foundation for Taxpayer and Consumer Rights (FTCR). “For years poor people have needed a lifeline insurance policy like the Lifeline and Universal services available to energy and telephone consumers. This program treats insurance like a utility and will be a model for the nation.”
The State Assembly’s Insurance Committee called the hearing to discuss the implementation of the pilot programs signed into law by Governor Davis earlier this month. According to FTCR, the new law provides the framework for effectively addressing the uninsured motorist problem but does not provide sufficient outreach tools for fulfilling the objectives of the program. Advocates at the hearing called for public and private efforts to increase public awareness about the lifeline insurance option. Joining FTCR on the panel were advocates from Consumers Union, Service Employees International Union, ACORN and the Legal Aid Foundation of Los Angeles.
“We need outreach, education and advertising to make the Lifeline program work,” said Doug Heller, consumer advocate with FTCR. “Every low-income driver in Los Angeles should know that they have access to an insurance lifeline. The state has done a fine job informing people that they must purchase insurance, we must now do an even better job letting poor people know how to get it.”
Groups called on insurance companies to hold true to their promise in letters to Governor Davis that they will “actively participate” in the Lifeline program. The companies stand to benefit both through likely profit on the policies sold and through a tax credit for participation legislators agreed to at the urging of the companies. Because the policy will be apportioned to insurers according to their market share in the private passenger market, advocates suggested that the largest insurers — State Farm, Farmers, AAA, Allstate and Mercury — should make substantial investment in Lifeline marketing, either individually or through industry trade associations.
“This law pushes insurers into communities that they have stayed out of without justification,” said Heller. “The companies will only start selling Lifeline policies in low-income communities because they have to, but in years to come we expect them to stay in the communities because it is good business.”
Advocates also encouraged agents to actively sell the Lifeline policy, noting that, other than affordability, a key reason cited by the poor for not insuring is that there are very few agents in low-income communities. There is a $54 commission for each standard Lifeline policy sold.
Below is an explanation of the Lifeline plan:
Price of Policy (Los Angeles)
$450 per year
$562.50 for unmarried men 19-24 years of age
Price of Policy (San Francisco)
$410 per year
$512.50 for unmarried men 19-24 years of age
10/20/3 liability limits (reduced from standard coverage of 15/30/5)
Household Income at 150% of poverty or below — approximately $20,910 per year for a family of three
Driving Record Qualification
Cannot have more than one violation point in previous three years — approximately 85%-90% of drivers qualify.
Must be at least 19 and licensed for three years
$100 down payment, Six $58.33 payments
$100 -$200 million in insurance savings to other insured motorists through reduced uninsured motorist premiums.
Lifeline Rate Adjustment
The Lifeline rate can be changed annually based on actual losses experienced in the program.
December 31, 2003, unless the Legislature acts to extend the program