Associated Press

SACRAMENTO — Senators approved a bill Saturday to let insurance companies offer discounts for customers who maintain coverage, even if they switch insurers.

Consumer advocates said the bill, by Sen. Don Perata, D-Oakland, will result in higher costs for previously uninsured motorists, or those who let their auto insurance lapse.

The Senate approved the bill 30-0, sending it to Gov. Gray Davis.

If it’s signed into law, the consumer group Foundation for Taxpayer and Consumer Rights plans to sue to overturn it “because it violates the prohibition under Proposition 103 on surcharging the uninsured,” said consumer advocate Jamie Court. Proposition 103 was the insurance reform measure approved by voters in 1988.

Supporters said the bill would increase competition among insurance companies and drive down insurance rates. But critics said it would hurt first-time insurance buyers by increasing their costs to make up for the persistency discounts.

State Insurance Commissioner Harry Low, who opposes the bill, has proposed regulations that would allow a persistency discount for customers who remain with one insurance company or its affiliate for an extended period of time.

Perata’s bill would allow an insurance company to use a customer’s record of maintaining coverage with that company, an affiliate or another insurer as a factor in determining the motorist’s auto insurance rates.

Bill supporters, which include several insurance companies, contend that maintaining coverage indicates a driver is a lower risk.

—————–

On the Net: Read the bill, SB689, at http://www.assembly.ca.gov