Program Provides Economic Opportunity in Tough Times, With No Taxpayer Cost
Santa Monica, CA – California lawmakers gave final approval Wednesday to legislation strengthening and extending the innovative “Low Cost Auto Insurance Program” that offers an affordable bare bones car insurance policy to low-income motorists with no taxpayer cost. Consumer advocates applauded lawmakers for passing AB 1597 (Jones) on a bipartisan basis and are urging Governor Schwarzenegger to sign the bill in order to keep this program available.
“The low cost auto insurance program is a win-win solution offering real help to low-income Californians without costing the public a dime,” said Douglas Heller, Executive Director of Consumer Watchdog, a nonpartisan nonprofit organization. “By signing this bill, Governor Schwarzenegger will allow those who are struggling in this brutal economy to afford car insurance and keep the roads safer.”
The program, which costs its policyholders less than $400 per year, provides basic liability coverage to low-income motorists with good driving records. The law requires that the premium charged to policyholders covers all the claims paid out under the program, making it entirely self-sustaining. AB 1597 makes the program more efficient and maintains its availability for another five years. The bill, by Assemblyman Dave Jones, is sponsored by the Department of Insurance, which oversees the program. Consumer Watchdog sponsored the original legislation, which created a pilot low cost auto insurance program in 1999.
Proactive Program Contrasts With Punitive Prop 17 Rejected By Voters In June
Consumer advocates note that the low cost auto insurance bill being sent to the Governor's office offers hope to Californians struggling to afford car insurance as a result of the lingering recession. The bill is a positive and practical approach to the problem of uninsured motorists in California, unlike Proposition 17, which was rejected by voters in June. That measure, funded by Mercury Insurance, would have forced Californians to pay a substantial penalty to purchase insurance if they had any lapse in coverage in the past five years.
"Voters didn't want to create new barriers to getting more drivers insured, and they rejected Prop 17. By giving good drivers access to an affordable policy, the low cost auto insurance program offers a consumer-oriented way to help solve the problem of uninsured motorists on the road," said Heller.
Background on the Low Cost Auto Insurance Program
In order to qualify for the program, drivers must have no more than one point on their driving record, must be 19 or over, with at least three years’ driving experience and cannot have an income exceeding $27,075 (or $55,125 for a family of four). Additionally, the insured vehicle must be worth less than $20,000. The policy includes coverage for $10,000 in bodily injury per person, $20,000 per accident and $3,000 in property damage.
About 55,000 Californians have purchased the low cost auto insurance program in the past, with about 12,000 current policyholders. Consumer advocates note that there have been more than 3,000 auto accidents in the past three years, and more than $8 million in claims paid, that were covered by Low Cost policies and would likely have been uninsured accidents if it weren't for the program.
Consumer advocates say that despite the many thousands who have been able to get insurance because of this program, not enough drivers are aware of it and that has to change in order to get the most out of the opportunity provided by the law.
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Consumer Watchdog, formerly the Foundation for Taxpayer and Consumer Rights is a nonprofit, nonpartisan consumer advocacy organization with offices in Washington, DC and Santa Monica, CA. Consumer Watchdog’s website is www.ConsumerWatchdog.org.