BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1597 (Jones)
Hearing Date: 8/2/2010 Amended: 4/13/2010
Consultant: Katie Johnson Policy Vote: BFI 10-0
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BILL SUMMARY: AB 1597 would extend the sunset on the California
Low-Cost Automobile Insurance Program from January 1, 2011, to
January 1, 2016.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
CLCA sunset extension Annual, fee-supported costs of Private*
$2,700 - $5,100
*Fully supported by subscriber premiums and insurer assessments
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STAFF COMMENTS:
This bill would extend the sunset on the California Low-Cost
Automobile Insurance Program (CLCA) from January 1, 2011, to
January 1, 2016. In 2009, there were 11,439 policies in force.
Existing law establishes CLCA, which is administered by the
California Automobile Assigned Risk Plan (CAARP). To be eligible
for CLCA, a motorist must be 19 years of age, qualify as a good
driver, have a vehicle valued at $20,000 or less, and meet
certain income requirements.
Based on current rates and policies in force, the CLCA annual
budget could range from $1.8 million - $4.2 million annually.
Policyholders pay annual premiums that are determined by the
CAARP advisory board and approved by CDI. Rates vary by county
and currently range between $161 and $368 annually. According to
the 2010 CLCA Report to the Legislature, rates were sufficient
to cover the costs of the program. Additionally, each CAARP
certified insurer pays an assessment equal to a percentage of
the number of people they insure. The assessment covers CAARP's
annual administrative costs to administer CLCA of approximately
$922,000.
Costs to the California Department of Insurance (CDI) to update
its CLCA operation plan would be minor and absorbable. There
would be minor savings to CDI with the elimination of the
requirement to notice public hearings in two newspapers in San
Francisco and Los Angeles. Public hearings would be required to
be conducted according to the Administrative Procedures Act.
Additionally, this bill would make other procedural changes that
support technology instead of a paper process and other
improvements to make the administration of CLCA more efficient.
Education and Outreach Cost Pressure
Additionally, existing law permits CDI to spend $0.05 of a $0.30
special assessment on automobile insurers, on low-income
automobile insurance consumer education and
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AB 1597 (Jones)
outreach. The special assessment is authorized in statute
separately from CLCA. It was reauthorized by AB 601 (Garrick),
Chapter 247, Statutes of 2009. In FY 2008-2009, CDI spent $1.38
million and in FY 2009-2010 spent $1.41 million of the special
assessment on CLCA consumer education and outreach.
Previous Legislation
AB 725 (Jones, 2009), a bill that similarly would have extended
the CLCA sunset, was vetoed by the Governor. He said in his veto
message, "While I recognize the need to provide low cost
automobile insurance to low income drivers, the effectiveness of
this program is questionable? I encourage the author and sponsor
to take the next year to examine the results of the program and
determine if any changes are needed to the program to ensure its
success."
CDI sponsors this bill in response to the veto message and
reports an 18.9 percent increase in enrollment in 2009 and
expects high numbers in 2010 too.