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NEWS RELEASE
Jun 01, 1999


CONTACT: Doug Heller - 310-392-0522 x309

California Senators Pass Lifeline Auto Insurance

Sacramento -- The California Senate today passed, by a vote of 21-12, legislation that would require auto insurers in California to sell a low-cost, basic insurance policy to qualifying low-income drivers. The bill, SB 171 (Escutia), sponsored by the Foundation for Taxpayer and Consumer Rights (FTCR), now moves to the Assembly.

Similar to "lifeline" telephone and electricity service, the "Lifeline" auto insurance would be made available to qualifying low-income drivers. The threshold to purchase the policy would be an annual income of 150% of the federal poverty level (approximately $20,000 per year for a family of three) or less and a good driving record. A recent Department of Insurance study estimates that 87% of all uninsured motorists would qualify.

"All drivers benefit when a low-cost policy is made available to presently uninsured low-income drivers," said Doug Heller, consumer advocate with FTCR. "Poor people who are now made criminals when they don't buy auto insurance, will finally have a real opportunity to comply with the state's insurance requirement. And, by reducing the number of uninsured motorists on the road, Lifeline Auto will reduce the uninsured motorist premiums that we all pay."

In the plan a "very good" driver one without a violation point in three years would pay $300 per year or $25 per month; a "good driver" with no more than one point in the previous three years would pay $400. It is estimated that approximately 85% of participants in the Lifeline plan would qualify for the $300 per year policy. To ensure affordability, the policy's coverage limits are dropped from the standard 15/30/5 to 10/20/3 which, advocates note, still covers the vast majority of auto accidents.

According to FTCR, an actuarial analysis of SB 171 demonstrates that if one fourth of the state's three to four million uninsured motorists bought the coverage California consumers would save $175 million through reductions in "uninsured motorist" premiums. The analysis illustrates that the Lifeline policy would not require insurers to lose money through this program, nor would it require any public or private subsidies.

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