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home / insurance / in the media

Sacramento Bee
Jan 14, 1999

by Jon Matthews

Legislation Would Aid Uninsured Drivers

Saying she knows first-hand about trying to survive in Los Angeles without a car, state Sen. Martha Escutia unveiled legislation Wednesday to create a low-cost, no-frills auto insurance policy with a premium of $ 300 per year.

Escutia, a Montebello Democrat, said too many otherwise law-abiding Californians are forced to drive to and from their jobs without legally required coverage because they can't afford existing premiums.

"We cannot make poor people criminals for driving to work because they do not have the resources to maintain auto insurance," Escutia said.

But insurance industry officials immediately questioned the plan, saying the $300 rate would have to be subsidized by other drivers because it wouldn't cover costs in at least some areas of the state.

"Attempts to lower the cost of auto insurance and to reduce the uninsured motorist population in California are worthwhile goals. . . . However, the latest proposal is an attempt to impose subsidies on all drivers as a method of financing a low-cost policy to certain designated individuals," said Barry Carmody, president of the Association of California Insurance Companies.

Escutia's announcement and the reaction were among the opening salvos in what is expected to be a long policy debate in the Capitol this year. State Insurance Commissioner Chuck Quackenbush already has said he will propose a different plan for low-cost auto insurance coverage, according to a spokesman. Complicating the debate is the fact that a law requiring motorists to carry insurance will expire at the end of this year unless renewed by lawmakers.

Escutia said that when she attended high school and college in the Los Angeles area, she couldn't afford auto insurance and ended up riding six different buses each day. Joining Escutia at a Capitol news conference was Nancy Hernandez, a mother of three from Los Angeles, who said she is forced to cut corners in shopping for her kids because of the $ 565 she must pay each year for basic auto insurance.

"It is very hard for me to pay for auto insurance and buy clothing for the kids, food and necessities like shampoo," she said.

The legislation, SB 171, is sponsored by the Santa Monica-based Foundation for Taxpayer and Consumer Rights. Backers said the new policy would be available to motorists with good driving records and whose annual household income is at or below 1 1/2 times the official poverty level, or about $ 20,000 for a family of three.

The policy, which insurance companies would be required to sell, would only provide liability coverage of up to $ 10,000 per individual, $ 20,000 per accident and $ 3,000 for property damage. Such limits would require a lowering of current state minimum coverage requirements for those joining the program.

Escutia said that while she had mentioned the bill in passing to representatives of Gov. Gray Davis, she had not yet received any commitment from the Democratic governor to support it.

Backers of the bill said that between 1.5 million and 2.5 million motorists drive without insurance, and that they hope at least 1 million of them would initially qualify for the program.

But Dan Dunmoyer, president of the Personal Insurance Federation of California, said bare-bones policies in some rural areas of California already can be purchased for under $ 200.

"Inside of Los Angeles, this (the Escutia bill) would have a substantial benefit. The question is, who would pick up the cost?" he said.

Backers of the bill, however, said that while the plan would not provide a profit for the insurance companies, it would cover costs and could eventually lead to widespread premium reductions as fewer uninsured motorists took to the road.


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