LOS ANGELES — A judge invalidated a state law that would have allowed discounts for longtime auto insurance customers who switch insurers.
Proposition 103, approved by California voters in 1988, requires auto insurers to base their rates mostly on a motorist’s experience, safety record and miles driven. It specifically barred such factors as a driver not having insurance or having a break in coverage when determining rates. It also prohibited insurance companies from penalizing people who had let their insurance lapse or were uninsured when setting rates.
Gov. Gray Davis signed a bill last year that allows an auto insurer to offer discounts to new customers who have a record of maintaining coverage with a competitor.
Davis defended the bill at the time, saying it encouraged competition by allowing customers to leave their insurers for a cheaper plan without losing their discount.
The law was challenged in court by Foundation for Taxpayer and Consumer Rights, Consumers Union, Public Advocates, the Southern Christian Leadership Conference and the National Council of La Raza.
“This bill provided a very small benefit for drivers who had previous insurance at the expense of drivers who did not,” Norman Williams, an Insurance Department spokesman, said Thursday. “It was a financial discouragement against obtaining insurance for uninsured drivers.”
The ruling was praised by Doug Heller, senior consumer advocate for the Foundation for Taxpayer and Consumer Rights.
“It’s a victory for the people,” Heller said. “Judge Janavs stood foursquare as did the insurance commissioner to protect the public from unfair surcharges the public banned 15 years ago.”