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May 28, 2002

CONTACT: Doug Heller - 310-392-0522 x309

California Senate Approves Bill to Increase Participation in Low-Cost Auto Insurance Program

SB 1427 Would Lower Price, Make Low-Cost Auto Insurance Available to More Drivers
California Senators passed refinements to the state's Low-Cost Auto Insurance Program, which was originally enacted in 1999. To date, approximately 3,000 Californians have purchased the low-cost policy, and it is estimated that thousands more have purchased private market insurance after inquiring with insurance agents about the low-cost program. SB 1427 (Escutia), sponsored by The Foundation for Taxpayer and Consumer Rights (FTCR), will lower the current $450 premium in Los Angeles ($410 in San Francisco) to $319 per year for good drivers in both counties.

"With laws mandating that all motorists carry insurance, the state's low-cost program is the only option for low-income drivers who have been shut out of the regular insurance market because premiums are too high," said Douglas Heller, senior consumer advocate with FTCR. "This legislation refines the program to ensure that it reaches more drivers, which means that there will be fewer uninsured on the road."

The proposed law would also make the program available to an increased number of drivers by increasing the income threshold from 150% of the poverty level ($22,530 per year for a family of three) to 250% of the poverty level ($37,550 for a family of three). SB 1427 would require insurance agents to inform customers about the availability of the program. The bill would also add additional medical coverage for policyholders and their passengers, and it would remove the sunset date from the program, which would otherwise cancel the program at the end of 2003.

"To make this program a success, low-income drivers must know that it exists. It is in every driver's interest to see more motorists insured, and this bill is essential in the effort to reach more uninsured drivers," said Heller.

Insurance industry opponents of SB 1427 were also opposed to the original Low-Cost Insurance program legislation until lawmakers agreed to increase the annual price of a "low-cost" policy to $450 in Los Angeles County, as well as accept a variety of other compromises to comply with the industry's demands. Though still lower than what is available to most drivers in urban Los Angeles, the price has been a barrier for low-income motorists and should be lowered to increase the efficacy of the program.

Consumer advocates consider a lower premium feasible, because, according to available data, Low-Cost policyholders -- who must be "good drivers" to qualify -- have imposed very low claim costs on insurers. Data indicates that claim payments resulting from these policyholders have been approximately 50% lower than the national averages.

To qualify for the program currently, motorists must live in Los Angeles or San Francisco county; they must earn no more than 150% of the federal poverty level ($22,530 for a family of three); they must have no more than one violation point on their driving record; they must be licensed for at least three years. To receive more information about the program, consumers should call 1-800-622-0954.


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