Sen. Escutia Plan Creating $300 Per Year Policy Would Be First of Its Kind in Nation
Sacramento — Legislation which would provide low-income Californians access to an affordable auto insurance policy was introduced this week by California State Senator Martha M. Escutia (D-Montebello) and sponsored by the Foundation for Taxpayer and Consumer Rights, the non-profit organization which spearheaded and enforces California’s 1988 insurance reform, Prop. 103.
“Insurers have been gouging Californians for years, leaving insurance entirely unaffordable for millions of drivers,” said Jamie Court, consumer advocate for the Foundation for Taxpayer and Consumer Rights. “Insurance companies have not managed to create a product affordable to poor people. Yet, without raising taxes, and at no cost to insured drivers, we can solve this problem for millions of motorists in the state by creating the Lifeline Automobile Insurance Plan.”
SB 171 requires all insurance companies selling automobile policies in the state to make available a basic liability policy for $300 annually or $25 per month. Similar to state mandates for affordable telephone and electric bills, the Lifeline Automobile Insurance Plan (LAIP) will make the legally required minimum coverage affordable to over 3 million Californians who drive uninsured and hundreds of thousands more who do not drive because they cannot obtain affordable insurance.
“Many motorists drive without insurance simply because they cannot afford any coverage,” said Escutia. “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 $2000 a year. If we lower the cost of auto insurance, we can reduce the number of uninsured motorists.”
LAIP, which will be a special program administered under the California Automobile Assigned Risk Plan (CAARP), will provide a low-cost policy to motorists who qualify as both low-income and low-risk drivers. Low-income, according to the legislation, means a household income not exceeding 150% of the Federal poverty level, or approximately $20,000 for a family of three. To qualify as a low-risk driver, motorists must have no more than one violation point in the last four years.
“My budget is very tight but I want to abide by the law,” said Nancy Hernandez, a mother of three living in Los Angeles. “If I could pay $300 per year that would be much better on my budget. It would help to have more food in the house, better clothing on my children and good shoes for my children. Since having auto insurance is the law, it should be made affordable.”
Approximately 3.4 million Californians own 5.3 million uninsured vehicles, according to a recent report by the California’s Uninsured Policy Research Bureau of the California Department of Insurance. The report ‘ “California Uninsured: Preliminary Report,” September 28, 1998 ‘ states that the reason most people cite for not having auto insurance is that insurance “costs more money than I have.”
SB 171 was developed by actuaries and economists working with the Foundation for Taxpayer and Consumer Rights. The $300 per year policy allows insurers to provide the coverage to low-risk drivers at no loss to the company, taxpayers or insured customers. In fact, the “uninsured premium” that most Californians pay will likely drop because, as more drivers purchase insurance, the likelihood of being hit by an uninsured motorist will decline.