Insurance Legislation

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City News Service

A Montebello lawmaker introduced a state bill that would provide $25-a-month auto insurance for low-income drivers.

“Many motorists drive without insurance simply because they cannot afford any coverage,” said Sen. Martha Escutia, D-Montebello.

“We cannot make poor people criminals for driving to work because they do not have the resources to maintain auto insurance, which can cost as much as $2,000 a year.

“If we lower the cost of auto insurance, we can reduce the number of uninsured motorists,” she added.

But an insurance industry representative said the Escutia measure is misguided because it forces all drivers to subsidize the low-cost policy.

The bill “creates two subsidies, one in the initial pricing of the product, and the second on the claims side when these motorists are involved in accidents and the claims exceed the financial limits of the low-cost policies,” said Barry Carmody. He is president of the Association of California Insurance Cos.

The measure is sponsored by the Foundation for Taxpayer and Consumer Rights, a non-profit organization involved in the 1988 insurance reform initiative Proposition 103.

Under Escutia’s SB 171, a basic liability policy would cost $300 a year, said Jamie Court, advocacy director for the foundation.

The Lifeline Automobile Insurance Plan would make the legally required minimum insurance coverage affordable to more than 3 million motorists, Court said.

“Low-income motorists should not have to choose between food and auto insurance because of insurance industry price gouging,” Court said. “If insurance is mandated and punishable by state law, it should be made affordable by state law.”

Qualified motorists must be low-income and low-risk. The household income cannot exceed 150 percent of the federal poverty level, or about $20,000 for a family of three, Escutia said. Also, drivers cannot have more than one traffic violation point in the last four years, she said.

Nancy Hernandez, a mother of three in Los Angeles, supports the bill. “My budget is very tight, but I want to abide by the law,” she said. “If I could pay $300 per year, that would help to have more food in the house, better clothing on my children and good shoes for my children.”

According to a recent report by the state Uninsured Policy Research Bureau, 3.4 million residents own 5.3 million uninsured vehicles. In the report, most people said they cannot afford car insurance.

Escutia said the “uninsured premium” motorists pay will likely drop because there will be fewer uninsured drivers on the road.

Carmody disagreed.

“In its current form, (the bill) imposes a costly social mandate on all California drivers, and will erode the fairness of the current system,” he said.

“SB 171 should be amended to focus on reducing the costs in the system, and we will raise these issues as the bill is considered by the Legislature.

“It is unfortunate that SB 171 ignores the number one cost driving auto insurance rates — litigation,” he added.

“It is estimated that Proposition 213, an insurance industry supported initiative, has saved motorists in California more than $1 billion in reduced premiums by helping to eliminate unjustified litigation.”

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