BILL ANALYSIS Ó
AB 2885
Page 1
Date of Hearing: April 6, 2016
ASSEMBLY COMMITTEE ON INSURANCE
Tom Daly, Chair
AB 2885
(Committee on Insurance) - As Introduced February 25, 2016
SUBJECT: Insurance: low-cost automobile insurance program
SUMMARY: Makes technical changes to the statutes governing the
low-cost automobile insurance program (LCAP). Specifically,
this bill:
1)Repeals the requirement that the California Automobile
Assigned Risk Program (CAARP) Advisory Committee report to the
Insurance Commissioner (commissioner) on the feasibility of
the following:
A) allowing LCAP policies to be reinstated,
B) allowing LCAP premium payments to be made on an
installment basis,
C) allowing credit card payments for LCAP premiums, and
D) expanding LCAP eligibility to include emancipated
minors.
AB 2885
Page 2
1)Repeals statutes establishing the LCAP as a pilot program and
replaces it with language establishing the LCAP as a statewide
program.
2)Repeals the statute specifying that constitutional challenges
to the LCAP must be filed by February 1, 2000.
EXISTING LAW:
1)Requires the owner/operator of an automobile to demonstrate
financial responsibility. This requirement is most commonly
fulfilled by purchasing automobile insurance.
2)Specifies that automobile insurance must provide liability
coverage with at least the following coverage limits (minimum
limits policy):
A) $15,000 for injury to a single person
B) $30,000 for injury to two or more people in the same
accident
C) $5,000 for property damage
1)Establishes within the CAARP the LCAP to provide low income
drivers with a more affordable insurance policy to satisfy the
financial responsibility requirement.
2)Requires LCAP policies provide the following coverages:
A) $10,000 for injury to a single person
B) $20,000 for injury to two or more people in the same
accident
C) $3,000 for property damage
1)Permits, generally, individuals with good driving records and
income below 250% of the poverty level to purchase insurance
AB 2885
Page 3
through the LCAP.
2)Sunsets the LCAP effective January 1, 2020.
FISCAL EFFECT: Undetermined
COMMENTS:
1)Purpose . This bill cleans up the Insurance Code provisions
related to the LCAP program. As the program has evolved many
of the provisions enacted to allow its startup have become
obsolete and should be updated.
2)Financial Responsibility . California law requires anyone
owning or operating an automobile to demonstrate "financial
responsibility." While there are a number of options
available to satisfy this requirement, virtually all drivers
purchase a private passenger automobile insurance policy to do
so. Despite this requirement, the Department of Insurance
estimates that between 3 and 4 million vehicles in California
are operated without insurance.
3)CAARP/LCAP . The LCAP was established to partially address the
problem of uninsured drivers by making cheaper insurance
policies available to low-income drivers with good driving
records. LCAP policies were made cheaper by creating a policy
with lower coverage limits that satisfies the financial
responsibility law. Relatively few drivers buy LCAP policies
(approximately 11,000 at present) because they are frequently
able to buy a policy from a private insurer with higher limits
at only a slightly higher price.
REGISTERED SUPPORT / OPPOSITION:
AB 2885
Page 4
Support
None received
Opposition
None received
Analysis Prepared by:Paul Riches / INS. / (916) 319-2086