When you purchase auto insurance, you are protected against being charged any penalty or extra premium for not already having an insurance policy. Under Proposition 103, your auto insurance company cannot surcharge you or charge you a different rate just because you weren't insured before, or had a lapse in coverage.
California has an uninsured motorist problem. Many motorists do not purchase insurance coverage because they cannot afford to. As a result, those who obey the law and buy insurance sometimes end up paying for extra insurance coverage, known as "uninsured motorist coverage," to protect themselves if they are hit by someone who has no insurance coverage.
By prohibiting unfair practices and excessive rates, Proposition 103 sought to make insurance more available and affordable -- so that there would be fewer uninsured motorists on the road.
To make sure that those without insurance were not discouraged from buying insurance, 103 prohibited companies from surcharging applicants just because they were not previously insured or had had a lapse in coverage.
Text of Proposition 103 as enacted by the voters:
(c) The absence of prior automobile insurance coverage, in and of itself, shall not be a criterion for determining eligibility for a Good Driver Discount policy, or generally for automobile rates, premiums, or the group plan.
Amendments (changes from voter approved law in bold):
No changes to the original text of this provision have been enacted.
Status of Provision:
CONSUMER ALERT: Many insurers are violating this provision of Proposition 103.
Some have attempted to do so in an indirect and devious manner, by requiring that applicants for insurance show proof of prior insurance as evidence that they have a good driving record (insurers call this "accident verification"). Others simply ignore the law. Former Insurance Commissioner Quackenbush condoned these lawbreakers. (Read more about the Quackenbush Scandal here.)
FTCR has sued several insurance companies (the S. California Auto Club, Safeco, and GEICO) for violating this law (see below). Acting in response to an FTCR petition, the California Department of Insurance initiated investigations into the violations and has issued rulings ordering insurers to cease their violations of the law (see below).
In 2002, Mercury Insurance Company, one of the insurers which has systematically violated the law, tried to get the law itself changed so that it could not be held responsible for its lawbreaking. Proposition 103 forbids such hostile amendments. (See the section on the Legislature and Prop. 103). However, after Mercury showered the Legislature with campaign contributions, lawmakers enacted the legislation. California Gov. Gray Davis, citing Proposition 103, vetoed the bill.
Relevant Legal Materials:
Read the regulation proposed December 21, 2001 by the California Department of Insurance in response to FTCR petition, prohibiting "no prior insurance" surcharges. This regulation became effective on Sept. 26, 2002.
Read the regulation proposed on December 21, 2001 by the California Department of Insurance in response to FTCR petition, to prohibit insurers from using evidence of prior insurance coverage for Good Driver "accident verification" purposes. This regulation became effective November 30, 2002.
Read FTCR's objections, filed May 8, 2001, to a settlement of a class action lawsuit in which the insurance company would be allowed to continue to violate the law.
FTCR factsheets concerning Mercury Insurance Company's 2002 attack on the law:
Aug. 29, 2002 - SB 689 -- A Double Surcharge On Poor Drivers.
FTCR news releases concerning Mercury Insurance Company's 2002 attack on the law:
Sep 24, 2002 - Mercury Insurance Bill Would Make Auto Coverage Too Costly for Newly Licensed Immigrants. With Driver's License Bills On Governor's Desk, Insurance Proposal to Surcharge Previously Uninsured "Makes No Sense".
Aug 07, 2002 -
Insurance CEO Attempts to Undermine Cal. Insurance Commissioner, Rip Off Consumers. So-Called "Discount" in Legislation Creates Surcharge on Poor and Will Keep All Drivers' Premiums High.
Updated January 31, 2003