Santa Monica, CA – Low-income Californians with good driving records should be given a 3.9% rate decrease on the state's innovative Low Cost Auto Insurance Program, according to an actuarial analysis Consumer Watchdog submitted to the California Department of Insurance Wednesday. The Insurance Commissioner is conducting an annual rate review to determine whether to increase, decrease or maintain the program's rate structure, which is available at http://mylowcostauto.com/aboutclca.php.
The non-profit Consumer Watchdog filed the data showing the need for a decrease after the California Automobile Assigned Risk Plan (CAARP), which oversees the program, proposed to raise premiums by 6.7%, or almost $25 for drivers in Los Angeles where most of the policies are sold. Consumer Watchdog's analysis finds that rates should be coming down by about $14 in Los Angeles.
"This program is built to provide very inexpensive insurance to low-income drivers who can't otherwise afford coverage, so price is of the utmost concern," said Consumer Watchdog's Litigation Director Pamela Pressley. "For families struggling financially, a $40 swing in expenses makes a real difference."
Consumer Watchdog's actuarial analysis, conducted by Allan Schwartz of AIS Risk Consultants, Inc., determined that the CAARP, the program manager, failed to use program data to project future losses as state law requires. CAARP's proposed rate hike relies on generic statewide data, while Consumer Watchdog found that using the program-specific data results in evidence for a decrease.
The Low Cost Auto Insurance Program makes a bare bones auto insurance policy available to qualifying low-income, good drivers throughout the state at prices ranging from $231 annually in San Luis Obispo County to $347 in Los Angeles County. The Commissioner conducts an annual review of the rates. By law, the rates must be adequate to pay for the program without any subsidy from other drivers or any taxpayer cost. Over 60,000 Californians have purchased a Low-Cost policy since the program's initial pilot project began in 2000.
Consumer Watchdog said that many more low-income drivers and others who simply don't drive because they can't afford insurance would purchase the policy if consumers knew about it and could more easily access it. In 2011, Governor Brown signed AB 1024 (Hueso), sponsored by Consumer Watchdog, that will make the policy available for purchase online at the Department of Insurance-sponsored website http://www.MyLowCostAuto.com.
The consumer group said that another factor limiting consumer awareness of the program lies with insurance agents and companies in California failing to live up to their obligation to inform customers of the program. Under California law, when any consumer seeks to purchase a basic-limits auto insurance policy, the agent or broker is required to provide information about the Low Cost Program, but, Consumer Watchdog believes, that disclosure is not made far too often.
"If drivers don't know there's an affordable way to get insured and drive legally, they may end up driving uninsured, which is why the law clearly requires agents to pass on information about this program," said Pressley. "If any Californian inquired with an insurance company or agent about buying a basic insurance policy and were not told about the Low Cost Auto Program, we want to know about it."