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
          BILL SUMMARY:  AB 1597 would extend the sunset on the California  
          Low-Cost Automobile Insurance Program from January 1, 2011, to  
          January 1, 2016.
                            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

          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  



          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  

          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.