Senate BillNo. 1273


Introduced by Senator Lara

February 21, 2014


An act to amend Sections 11629.7, 11629.71, and 11629.72 of, and to repeal Section 11629.84 of, the Insurance Code, relating to insurance.

LEGISLATIVE COUNSEL’S DIGEST

SB 1273, as introduced, Lara. Insurance: low-cost automobile insurance program.

Existing law establishes within the California Automobile Assigned Risk Plan (CAARP) a low-cost automobile insurance program for all counties in California, until January 1, 2016, in order to provide a means for eligible consumers to buy automobile insurance, as specified. The parameters of the program, include, but are not limited to, value limits for the insured vehicle, initial ratesetting for certain counties, a surcharge for specified high-risk drivers, eligibility, sales commissions set at the rate CAARP pays for private passenger nonfleet risks, cancellation restrictions, and reporting requirements.

This bill would revise and recast the parameters of the program by, among other things, deleting provisions that limit the initial implementation of the program to specified counties and require the Insurance Commissioner to make a need-based assessment as to implementation in all other counties, deleting the repeal date of the program, thereby extending the operation of the program indefinitely, and deleting the limits on the value of an automobile that can be insured through the program. The bill would also expand the surcharge and eligibility requirements to include drivers with fewer than 3 years of driving history, including a person who operates a motor vehicle with a specified type of driver’s license, or drivers who have not been continually licensed for the past 3 years.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 11629.7 of the Insurance Code is
2amended to read:

3

11629.7.  

(a) There is established, within the California
4Automobile Assigned Risk Plan established under Section 11620,
5a low-cost automobile insurance program for all counties in
6California.

begin delete

7(b)  For the purpose of making the low-cost automobile
8insurance program operational in all counties of California,
9pursuant to subdivision (a), a low-cost automobile insurance
10program shall commence operations in the Counties of Alameda,
11Fresno, Orange, Riverside, San Bernardino, and San Diego,
12effective April 1, 2006, and shall be made operational in all other
13counties of California based upon a determination of need made
14by the commissioner. Program outreach shall focus primarily on
15those counties which have the highest number of uninsured drivers
16or the highest percentage of uninsured drivers or the highest
17percentage of low-income individuals. In making the determination
18of need for each county, the commissioner shall consider each of
19the following:

end delete
begin delete

20(1) The number or percentage of motorists within the county
21who are uninsured.

end delete
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22(2) The number or percentage of residents within the county
23who are low income.

end delete
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24(3) The availability of affordable automobile insurance options
25for the county’s low-income residents within the private automobile
26insurance marketplace.

end delete
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27(c) (1) After making the initial determination of need, the
28commissioner shall, as soon as is practicable, hold a public meeting
29in that county.

end delete
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30(2) The public meeting required by paragraph (1) shall be held
31not for the consideration of rates, but for the public discussion of
32the need and desirability of the program for the consumers of the
33county. Within 30 days after the public meeting, the commissioner
34shall make public his or her final determination of whether a need
P3    1for the program exists within the county. A separate hearing shall
2be held for the consideration of rates pursuant to Section 11629.72.

end delete
begin delete

3(d)

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4begin insert (b)end insert The commissioner, after a public hearing, shall approve or
5issue a reasonable plan for the equitable apportionment, among
6insurers required to participate in the California Automobile
7Assigned Risk Plan established under Section 11620, of persons
8begin delete residing in the counties or cities and counties set forth in
9subdivisions (a) and (b)end delete
who are eligible to purchase through the
10programbegin delete established in each county or city and countyend delete a low-cost
11automobile insurance policy, as described in Section 11629.71.
12The program shall be conducted in conjunction with the California
13Automobile Assigned Risk Plan established under Section 11620.

14

SEC. 2.  

Section 11629.71 of the Insurance Code is amended
15to read:

16

11629.71.  

A low-cost automobile insurance policy for purposes
17of the program established under this article shall have all of the
18following attributes:

19(a) The policy shall offer coverage in the amount of ten thousand
20dollars ($10,000) for bodily injury to, or death of, each person as
21a result of any one accident and, subject to that limit as to one
22person, the amount of twenty thousand dollars ($20,000) for bodily
23injury to, or death of all persons as a result of any one accident,
24and the amount of three thousand dollars ($3,000) for damage to
25property of others as a result of any one accident.

26(b) The coverage required by Section 11580.2 shall be made
27available to the consumer. However, an insurer may charge a
28premium for that coverage in addition to the premium set forth in
29Section 11629.72. Notwithstanding the coverage amounts required
30by Section 11580.2 and Section 16056 of the Vehicle Code,
31uninsured motorist coverage issued in conjunction with a low-cost
32automobile policy under the program, with coverage limits at least
33equal to the limits of liability in the underlying low-cost automobile
34policy, shall satisfy the requirements of Section 11580.2 and the
35financial responsibility requirements of Sections 4000.37, 16021,
36and 16431 of the Vehicle Code.

37(c) Medical payments coverage shall be made available to the
38consumer. However, an insurer may charge a premium for that
39coverage in addition to the premium set forth in Section 11629.72.

P4    1(d) The policy shall have an initial term of one year, renewable
2on an annual basis thereafter.

3(e) The policy shall cover the person named in the policy, and
4to the same extent that insurance is provided to the named insured,
5any other person using the automobile, provided the use is with
6his or her permission, express or implied, and within the scope of
7that permission, except that the policy shall not cover members of
8the named insured’s household who do not satisfy the requirements
9of subdivisions (b) to (e), inclusive, of Section 11629.73.

begin delete

10(f) The policy shall provide coverage for an automobile with a
11value, at the time of purchase by the insured, of twenty thousand
12dollars ($20,000) or less, as evidenced by the value given to the
13automobile by the Department of Motor Vehicles in assessing
14vehicle license fees.

end delete
15

SEC. 3.  

Section 11629.72 of the Insurance Code is amended
16to read:

17

11629.72.  

(a) begin deleteEffective March 1, 2003, the annual rate offered
18under the program for the low-cost automobile policy, unless and
19until the time that the rate is adjusted, shall be three hundred
20forty-seven dollars ($347) per covered vehicle for the County of
21Los Angeles and three hundred fourteen dollars ($314) per covered
22vehicle for the City and County of San Francisco, unless the
23commissioner establishes that rate or a different rate prior to that
24time. The annual rate offered initially under the program for each
25of the Counties of Alameda, Fresno, Orange, Riverside, San
26Bernardino, and San Diego shall be established by the
27commissioner no later than April 1, 2006. end delete
The annual rate offered
28begin delete initiallyend delete under the program for each of thebegin delete otherend delete counties in
29California shall be established at a date according to the discretion
30of the commissioner. A surcharge, as a percentage of the base rate,
31shall be added to the base rate and that percentage shall be set at
32the discretion of the commissioner, ifbegin delete the named insured is an
33unmarriedend delete
begin insert the named insured or a resident of the household of the
34named insured will be a driver of the automobile covered under
35the low-cost policy, and is any of the following:end insert

36begin insert(1)end insertbegin insertend insertbegin insertAn unmarriedend insert male betweenbegin delete the ages ofend delete 19 and 24begin delete, inclusive,
37or if an unmarried male between the ages of 19 and 24, inclusive,
38resides in the household of the named insured and will be a driver
39of the automobile covered under the low-cost policyend delete
begin insert years of ageend insert.

begin insert

P5    1(2) Operates a vehicle with a driver’s license issued by the
2Department of Motor Vehicles pursuant to Section 12801.9 of the
3Vehicle Code and has fewer than three years of driving history.

end insert
begin insert

4(3) Has fewer than three years of driving history.

end insert
begin insert

5(4) Has not been continually licensed to drive for the past three
6years.

end insert

7(b) begin insert(1)end insertbegin insertend insertIn addition to existing premium installment options
8offered by the California Automobile Assigned Risk Plan under
9Article 4 (commencing with Section 11620), the plan shall also
10make available to an insured under the program a premium
11installment option pursuant to which an insured is required to pay
12not more than 15 percent of the total policy cost upon issuance of
13the low-cost policy, followed thereafter by six other payments.begin delete Noend delete

begin insert

14(2) Beginning on January 1, 2015, the commissioner may
15approve or issue new installment plans in addition to or replacing
16those offered pursuant to paragraph (1).

end insert

17begin insert(3)end insertbegin insertend insertbegin insertNoend insert other premium financing arrangement shall be permitted.

18(c) Rates for policies issued under the program in each county
19or city and county shall be reviewed and revised as follows:

20(1) Rates shall be sufficient to cover (A) losses incurred under
21policies issued under the program, and (B) expenses, including,
22but not limited to, all reasonable and necessary expenses such as
23the costs of administration, underwriting, taxes, commissions, and
24 claims adjusting, that are incurred due to participation in the
25program. For purposes of this paragraph, “losses incurred” means
26claims paid, claims incurred and reported, and claims incurred but
27not yet reported. In assessing loss reserves, the commissioner shall
28only allow loss reserves that are estimated from actual losses in
29the program or comparable data by a licensed statistical agent, as
30adjusted to reflect coverage provided under the program.

31(2) Rates shall be set so as to result in no projected subsidy of
32the program by those policyholders of insurers issuing policies
33under the program who are not participants in the program.

34(3) Rates shall be set with respect to the program so as to result
35in no projected subsidy by policyholders in one county of
36policyholders in any of the other counties.

37(4) Commencing on January 1,begin delete 2001end deletebegin insert 2015end insert, andbegin delete annuallyend deletebegin insert no less
38than every three yearsend insert
thereafter, the California Automobile
39Assigned Risk Plan shall submit the loss and expense data, together
40with a proposed rate and the surcharge authorized by subdivision
P6    1(a) for the low-cost automobile policy for the program, to the
2commissioner for approval in accordance with this chapter. The
3commissioner shall act on the recommendation within 90 days.

4

SEC. 4.  

Section 11629.84 of the Insurance Code is repealed.

begin delete
5

11629.84.  

This article shall remain in effect only until January
61, 2016, and as of that date is repealed, unless a later enacted
7statute, that is enacted before January 1, 2016, deletes or extends
8that date.

end delete


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