Program Gives Lifeline In Tough Economy With No Taxpayer Cost
Santa Monica, CA — Governor Schwarzenegger has signed legislation, AB 1597 (authored by Assemblyman Dave Jones) to maintain California’s innovative auto insurance program for low-income Californians with good driving records. The California Low Cost Auto Insurance program (CLCA), which was set to expire this year without AB 1597’s 5-year extension, has provided car insurance to more than 50,000 Californians and has seen a surge in policyholders in the wake of the recession and high rates of poverty, according to data from the California Department of Insurance.
The program offers a bare bones policy that is often half the price of the least expensive insurance coverage otherwise available in many communities. The CLCA premium can be as low as $161 per year (in Imperial County) and up to $368 per year (in Los Angeles County.) The prices are set by the Insurance Commissioner to ensure that there is no taxpayer cost for the program and that it does not require a subsidy from drivers who purchase standard auto insurance. To date, an estimated 85% of drivers who have purchased the CLCA policy were previously uninsured motorists.
“The low-cost auto insurance program is an example of government finding an innovative way to address a serious problem and doing it without stretching taxpayer dollars,” said Douglas Heller, Executive Director of Consumer Watchdog.
Consumer Watchdog, which sponsored the 1999 legislation creating the program, has been working with community groups, insurance agents, the City of Los Angeles and the California Department of Insurance to raise awareness about the program. Lack of knowledge of the program among many qualifying drivers combined with a failure of many insurance agents to inform customers about the program, as required by law, has meant that there are thousands of uninsured drivers who could enroll if they were aware of the program. Consumer Watchdog’s outreach efforts and newly-created alliances aim to provide more motorists the opportunity to sign-up for this critical program.
A 2008 report by the Insurance Research Council estimated that about 18% of California drivers lacked coverage. And according to new census figures, about 5.6 million Californians now live below the poverty line, which is about $22,000 for a family of four.
Douglas Heller continued, “Millions upon millions are struggling in this economy, and the Low Cost Auto Insurance program allows cash-strapped motorists a chance to drive legally. That’s not just better for low-income drivers, but it’s a relief to everyone on the road when fewer people drive uninsured.”
Background on California’s Low Cost Auto Insurance Program
In order to qualify for the program, drivers must have no more than one point on their driving record, must be 19 or over, with at least three years driving experience and cannot have an income exceeding $27,075 (or $55,125 for a family of four). Additionally, the insured vehicle must be valued at less than $20,000. The policy includes coverage for $10,000 in bodily injury per person, $20,000 per accident and $3,000 in property damage.
Under the law, every insurance agent in the state is required to inform prospective insurance policyholders about the program, if the driver seeks to purchase a basic auto insurance policy.
Since the inception of the program, approximately 69,760 Californians have applied for the program, with 56,778 of those being accepted into the CLCA program. For 2010, approximately 6,028 applications have been received and 5,765 assignments have made it into CLCA. Consumer advocates note that there have been more than 3,000 auto accidents in the past three years, and more than $8 million in claims paid, that were covered by CLCA policies and would likely have been uninsured accidents if it weren’t for the program.
Drivers who want to find out more about the policy can go to the California Department of Insurance website – http://www.insurance.ca.gov/ or call 1-866-602-8861.
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Consumer Watchdog is a nonprofit, nonpartisan consumer advocacy organization with offices in Washington, DC and Santa Monica, CA. Consumer Watchdog’s website is: www.ConsumerWatchdog.org.