BILL NUMBER: SB 841 CHAPTERED
BILL TEXT
CHAPTER 169
FILED WITH SECRETARY OF STATE AUGUST 2, 2003
APPROVED BY GOVERNOR AUGUST 2, 2003
PASSED THE ASSEMBLY JULY 17, 2003
PASSED THE SENATE JUNE 4, 2003
AMENDED IN SENATE MAY 14, 2003
AMENDED IN SENATE APRIL 23, 2003
INTRODUCED BY Senator Perata
FEBRUARY 21, 2003
An act to amend Section 1861.02 of the Insurance Code, relating to
automobile insurance, and declaring the urgency thereof, to take
effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 841, Perata. Automobile insurance: rates: persistency.
Existing law, as enacted by Proposition 103, requires rates and
premiums for automobile insurance policies to be determined by the
application of specified factors in decreasing order of importance,
including the insured's driving record, the number of miles driven
annually, and the number of years of driving experience, and allows
the Insurance Commissioner to adopt additional factors by regulation
that have a substantial relationship to the risk of loss. Existing
law also provides that 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 insurability.
This bill would allow an insurer to use persistency of automobile
insurance coverage with that insurer, an affiliate, or another
insurer as an optional rating factor. Because the bill would
authorize the use of an additional factor in the determination of
premiums for automobile insurance policies, it would amend
Proposition 103 and would require a 2/3 vote.
The bill would declare that it is to take effect immediately as an
urgency statute.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1861.02 of the Insurance Code is amended to
read:
1861.02. (a) Rates and premiums for an automobile insurance
policy, as described in subdivision (a) of Section 660, shall be
determined by application of the following factors in decreasing
order of importance:
(1) The insured's driving safety record.
(2) The number of miles he or she drives annually.
(3) The number of years of driving experience the insured has had.
(4) Those other factors that the commissioner may adopt by
regulation and that have a substantial relationship to the risk of
loss. The regulations shall set forth the respective weight to be
given each factor in determining automobile rates and premiums.
Notwithstanding any other provision of law, the use of any criterion
without approval shall constitute unfair discrimination.
(b) (1) Every person who meets the criteria of Section 1861.025
shall be qualified to purchase a Good Driver Discount policy from the
insurer of his or her choice. An insurer shall not refuse to offer
and sell a Good Driver Discount policy to any person who meets the
standards of this subdivision.
(2) The rate charged for a Good Driver Discount policy shall
comply with subdivision (a) and shall be at least 20% below the rate
the insured would otherwise have been charged for the same coverage.
Rates for Good Driver Discount policies shall be approved pursuant
to this article.
(3) (A) This subdivision shall not prevent a reciprocal insurer,
organized prior to November 8, 1988, by a motor club holding a
certificate of authority under Chapter 2 (commencing with Section
12160) of Part 5 of Division 2, and which requires membership in the
motor club as a condition precedent to applying for insurance from
requiring membership in the motor club as a condition precedent to
obtaining insurance described in this subdivision.
(B) This subdivision shall not prevent an insurer which requires
membership in a specified voluntary, nonprofit organization, which
was in existence prior to November 8, 1988, as a condition precedent
to applying for insurance issued to or through those membership
groups, including franchise groups, from requiring such membership as
a condition to applying for the coverage offered to members of the
group, provided that it or an affiliate also offers and sells
coverage to those who are not members of those membership groups.
(C) However, all of the following conditions shall be applicable
to the insurance authorized by subparagraphs (A) and (B):
(i) Membership, if conditioned, is conditioned only on timely
payment of membership dues and other bona fide criteria not based
upon driving record or insurance, provided that membership in a motor
club may not be based on residence in any area within the state.
(ii) Membership dues are paid solely for and in consideration of
the membership and membership benefits and bear a reasonable
relationship to the benefits provided. The amount of the dues shall
not depend on whether the member purchases insurance offered by the
membership organization. None of those membership dues or any
portion thereof shall be transferred by the membership organization
to the insurer, or any affiliate of the insurer, attorney-in-fact,
subsidiary, or holding company thereof, provided that this provision
shall not prevent any bona fide transaction between the membership
organization and those entities.
(iii) Membership provides bona fide services or benefits in
addition to the right to apply for insurance. Those services shall
be reasonably available to all members within each class of
membership.
Any insurer that violates clause (i), (ii), or (iii) shall be
subject to the penalties set forth in Section 1861.14.
(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 insurability. However, notwithstanding subdivision (a),
an insurer may use persistency of automobile insurance coverage with
the insurer, an affiliate, or another insurer as an optional rating
factor. The Legislature hereby finds and declares that it furthers
the purpose of Proposition 103 to encourage competition among
carriers so that coverage overall will be priced competitively. The
Legislature further finds and declares that competition is furthered
when insureds are able to claim a discount for regular purchases of
insurance from any carrier offering this discount irrespective of
whether or not the insured has previously purchased from a given
carrier offering the discount. Persistency of coverage may be
demonstrated by coverage under the low-cost automobile insurance
program pursuant to Article 5.5 (commencing with Section 11629.7) and
Article 5.6 (commencing with Section 11629.9) of Chapter 1 of Part 3
of Division 2, or by coverage under the assigned risk plans pursuant
to Article 4 (commencing with Section 11620) of Chapter 1 of Part 3
of Division 2. Persistency shall be deemed to exist even if there is
a lapse of coverage of up to two years due to an insured's absence
from the state while in military service, and up to 90 days in the
last five years for any other reason.
(d) An insurer may refuse to sell a Good Driver Discount policy
insuring a motorcycle unless all named insureds have been licensed to
drive a motorcycle for the previous three years.
(e) This section shall become operative on November 8, 1989. The
commissioner shall adopt regulations implementing this section and
insurers may submit applications pursuant to this article which
comply with those regulations prior to that date, provided that no
such application shall be approved prior to that date.
SEC. 2. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
Because making a ratings discount portable will expand consumer
access to insurance and consumer choice, and will result in increased
competition in the marketplace, it is necessary that this act take
effect immediately.