Davis signs bills creating program for low-income drivers

San Francisco Examiner

Sacramento–The nation’s first low-cost car insurance program will park temporarily in San Francisco and Los Angeles under a trio of bills signed into law by Gov. Davis.

One in four San Francisco drivers doesn’t have automobile insurance, according to industry estimates. Across the state, 5.3 million drivers, out of about 23 million, are hitting the roads and freeways without car insurance, which is required by law.

The biggest offenders are younger low-income drivers, particularly in Southern California, who can’t afford high premium rates or who don’t have a license to drive in the first place. In Los Angeles, more than a third of all motorists don’t have car insurance.

Under three bills signed Sunday by Davis, a new pilot program will require insurance companies to offer inexpensive auto insurance to the poor. The Legislature wants to judge the program’s success over three years before taking it statewide or dumping it.

“My hope is this experiment is going to work and we’re going to have low-cost auto insurance for everyone in the state,” said state Sen. Jackie Speier, D-Daly City, author of the bill granting San Francisco the pilot project.

Under the program, drivers will have to show proof they make less than 150 percent of the federal poverty level. That’s about $ 23,000 a year for a family of four or about $ 18,000 a year for someone single.

Initially, the policies will cost $ 450 a year for Los Angeles drivers and $ 410 a year for San Franciscans. But there would be an additional 25 percent fee for single male drivers age 19 to 24, the most accident-prone on the roads.

Only drivers age 19 and over, with at least three years licensed driving experience and a relatively clean DMV record, would qualify. The policy will be bare bones, with a maximum of $ 20,000 in liability coverage if more than one person is injured and only $ 3,000 for property damage.

Three-year program

The program would be open to San Francisco and Los Angeles residents only and must begin by July 2000. It would end December 2003, unless the Legislature decides to continue the program.

With Davis’ signature, California becomes the first state to require a low-cost automobile policy, said Doug Heller, a spokesman for the Foundation for Taxpayer and Consumer Rights. Heller said the bills will have “national resonance” and help equalize auto rates for poor people.

“With the flat rate, if you live in the Mission District or the Sunset, you’re going to be paying $ 410,” Heller said. “That’s a dramatic change from the ZIP code-based system that was price-gouging poor people.”

The Personal Insurance Federation of California, which represents about 43 percent of all automobile insurers in the state, said “our member companies will participate in the project, while monitoring it closely.” That means figuring out if the cheap premiums will ultimately be worth it to insurance companies.

“We’re hopeful the pilot will be successful both in meeting the needs of the low-income community . . . and in establishing a rate that is sufficient to cover the costs of the policy,” said Dan Dunmoyer, president of the federation.

Insurance proof required

One bill in the package Davis signed Sunday will permanently extend the requirement that drivers carry proof of insurance. That law, also authored by Speier, was due to expire at the end of the year. The fine for not carrying proof of insurance also was lowered from $ 1,350 to a maximum of $ 500.

But a last-minute amendment to the bill would exempt San Francisco and Los Angeles residents from having to carry proof of insurance, starting in the year 2003.

Speier called that amendment “stupid,” but she included it to get a crucial vote from a Los Angeles lawmaker. Speier said she thinks the law may be changed back so that either San Francisco and Los Angeles residents will have to carry proof of insurance, or the whole state will be exempt, depending on the success of the pilot program.

“There are people who believe you can’t require proof of insurance unless you have a low-cost policy for poor people,” Speier said.