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San Francisco Chronicle
Apr 22, 1999
by Lynda Gledhill
Firms say plan favors L.A. over Bay AreaA key Assembly committee yesterday approved a bill creating low-cost insurance programs that insurance companies said will force Bay Area motorists to subsidize Los Angeles drivers.
The bill by Senator Martha Escutia, D-Huntington Park, would set low-cost insurance rates between $300 and $400 across the state for drivers with no more than one moving violation in three years. There are about 3 million -- about one out of five -- California drivers who are uninsured, despite a law requiring proof of insurance.
"If there is access to insurance, people will not have to break the law to earn a living," Escutia said. "It will not raise the rates of other drivers. This benefits all Californians."
However, industry officials said the flat rate will create subsidies and force companies to raise rates for drivers who live outside the Los Angeles area, the most expensive place for auto insurance in the state.
"In San Francisco, it costs less to be a good driver than it does in Los Angeles and Beverly Hills," said Dan Dunmoyer, president of the Personal Insurance Federation of California. "Why should there be a subsidy? No one argues that you should have to pay more for earthquake insurance in San Francisco than Sacramento because the risk is greater. It's the same principle."
A bill sponsored by the insurance companies that could have lowered the level of insurance but not set a flat rate was defeated in an Assembly committee yesterday. Dunmoyer said a rate of $550 would be more acceptable for insurance companies.
Attempt to create low-cost insurance have come up in the Legislature almost every year, but supporters hope they will be successful this time because the measure may be linked to the renewal of California's proof of insurance law.
Hillsborough Democrat Jackie Speier, chair of the Senate Insurance Committee, is sponsoring both a bill to renew the proof-of-insurance law and a bill creating a low-cost insurance program. Elements of her low-cost insurance plan probably will be combined with Escutia's bill before going to the Senate floor.
The low-cost insurance would be available only to people with low incomes, as measured by the federal poverty level.
Both bills also lower the amount of insurance provided. Current law specifies minimum coverage of $15,000 for injury of one person; $30,000 for injury of two people; and $5,000 for property damage. The new measures would reduce this to $10,000, $20,000 and $3,000.
Supporters of Escutia's legislation said it should not cost more to be a good driver in any one part of the state.
"A good driver doesn't cause a collision," said Doug Heller, assistant director of the Foundation for Taxpayer and Consumer Rights. "It shouldn't cost more. That's a notion the insurance company has been trying to pursue for years."
In an unusual move, the Senate Rules Committee has agreed to spend $25,000 to hire an actuary to analyze the auto insurance bills. An actuary runs the financial analysis to determine how much providing low-cost insurance would cost the insurance companies.
The foundation hired an actuary to provide Escutia with analysis for her bill, and insurance companies also use an actuary's analysis. Both sides said they welcome an independent analysis.
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