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home / insurance / in the media

Associated Press
Mar 06, 2000

by Jennifer Kerr

Backers upset over state department's proposed rules for low-income plan

SACRAMENTO (AP) -- The experimental low-cost auto insurance program due to debut this summer in two counties is running into problems.

Lawmakers and a consumer group backing the plan are upset over the first set of rules proposed by the state Insurance Department to run the program in Los Angeles County and San Francisco.

Those rules "would deter low income drivers from participating in the program, the very same drivers this program was intended to help," Sen. Martha Escutia, D-Commerce, said Monday in a letter to Insurance Commissioner Chuck Quackenbush.

The proposed regulations were rejected last week by a state agency charged with reviewing such rules for clarity and consistency with the law.

That rejection was expected because the Legislature gave regulators little time and insufficient direction to write complicated rules, said Tim Hart, chief of the department's legislative bureau.

Revised regulations will be submitted to the Office of Administrative Law possibly this week and are addressing one of the critics' main concerns, he said Monday.

The Legislature last year passed two bills establishing the four-year pilot programs in the two counties, beginning on July 1. The program will be run by the California Automobile Assigned Risk Plan, the state's existing program to find car insurance for problem drivers who have trouble getting it.

Lawmakers who authored the law and a consumer group backing it sent letters Monday to Quackenbush asking him to improve the regulations.
They were particularly unhappy with two rules. One would disqualify a low-income driver if someone else in the same household had car insurance through a regular policy or the assigned risk plan. The other would require qualified drivers to pay a nonrefundable $100 down payment on the low-cost policy.

Escutia said the first rule "would default qualified low-cost drivers based on who they live with, regardless of relationship."

Hart said the revised regulations will allow a motorist to qualify even if another unrelated household member, such as a roommate, has another kind of policy. But he said the nonrefundable deposit was necessary because that would barely cover an agent's costs if the motorist cancels.

He said the two bills passed last fall were silent on many aspects of the program that could be interpreted different ways and lawmakers have not before answered department requests for clarification.

"The fundamental question of interpretation has not been addressed yet. The silence has been deafening," he said.

Douglas Heller of the Foundation for Taxpayer and Consumer Rights said many of the problems were caused because the advisory group working on the regulations "reflects the narrow self-interest of insurance companies rather than a broader public interest."

Heller said "there is, at a minimum, an appearance of impropriety when a regulator depends upon the advice of the regulated to develop the rules with which they must comply. It is nothing short of the fox guarding the henhouse."

He urged Quackenbush to appoint a new advisory board.

Hart said the Legislature would have to change to law for that to happen. State law requires the CAARP Advisory Board to have eight insurance industry representatives, four from consumer groups, two insurance agents and one department representative, he said.

The new program is an experiment and there will be some "slippage and dislocation" as it is put into effect, he said.

"We have every interest in making certain the people who are the intended beneficiaries of the law do not become any more confused than they need to be in buying this product," he said.


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