A plan to reduce the number of uninsured motorists by lowering premiums in Los Angeles and San Francisco begins Saturday with civic leaders across the nation watching to see if it could work elsewhere.
“I believe it’s the best insurance that’s ever come along,” said 66-year-old Grace Luna, who has applied for the low-cost policy.
The program, which was approved by the Legislature last year, will be run by the California Automobile Assigned Risk Plan, a coalition of insurance companies. The agency can find car insurance for problem drivers who would have difficulty getting it otherwise.
Officials from Connecticut, Illinois and New Jersey have asked for data on whether significant numbers of people sign up for the plan. Also watching are Washington, Kentucky and Louisiana, which have considered similar programs, CAARP regional director Richard Manning said.
“They’re looking to see how well it does, how effectively it is presented to the public and how many people end up buying the insurance,” he said.
California’s proof-of-insurance law requires owners of the state’s nearly 27 million vehicles to show they have coverage when they register with the Department of Motor Vehicles.
But in high-risk, inner-city areas, many residents risk illegally driving without insurance rather than pay premiums that can run three times as much as those offered in the pilot program.
Nearly 1.8 million vehicles out of 6 million in Los Angeles lack insurance and nearly 80,000 out of 412,000 in San Francisco, according to Tim Hart, spokesman for the state Insurance Department.
“But we don’t know how many of the people in those areas will qualify for the program,” Hart said. “That’s why it’s called an experiment.”
Participants must have clean driving records and meet income and other guidelines to be eligible for the four-year pilot program. It charges $450 annually for a bare-bones auto policy in Los Angeles County and $410 in the San Francisco area. There is a 25 percent surcharge for unmarried, male drivers 19 to 25.
Douglas Heller of the Santa Monica-based Foundation for Taxpayer and Consumer Rights supports the program.
“Now many people who can’t afford regular coverage will no longer have to make that unfair decision between breaking the law and getting to work,” he said.
Luna, a retired union worker who lives in South Gate, a blue-collar community southeast of Los Angeles, is already paying for a bare-bones policy for her 1980 Chevrolet Citation – too much, she says.
“The insurance company I’m with now, they are charging me more than $700 yearly, and the broker who handles my policy is charging me $150 yearly, and that’s a heck of a lot of money for me,” said Luna, who said she is disabled and survives on Supplemental Security Income.
The low-cost policies satisfy the minimum amount of auto insurance required by the state, but will not pay drivers for injury to themselves or damage to their own cars, regardless of who caused the accident.
But participating in this program will enable them to collect pain and suffering settlements if another driver is at fault, which uninsured motorists are prohibited from doing under a 1996 state law.
The benefits of the policies include $10,000 in liability for one person’s medical bills, as much as $20,000 to cover more than one person and $3,000 for damage.
Insurance company lobbyists and consumer advocates agree that all insured motorists may eventually benefit from the low-cost plan because the cost of uninsured motorist coverage will diminish.
“That’s because the likelihood of running into someone who doesn’t have insurance will go down,” Heller said. “It’s the secret gift of this new plan.”