BILL ANALYSIS
AB 1597
Page 1
ASSEMBLY THIRD READING
AB 1597 (Jones)
As Amended April 13, 2010
Majority vote
INSURANCE 11-0 APPROPRIATIONS 13-2
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|Ayes:|Solorio, Blakeslee, |Ayes:|Fuentes, Conway, Ammiano, |
| |Anderson, Caballero, | |Coto, Davis, Bonnie |
| |Carter, Feuer, Hagman, | |Lowenthal, Hall, Nielsen, |
| |Hayashi, Niello, Salas, | |Norby, Skinner, Solorio, |
| |Torres | |Torlakson, Hill |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Harkey, Miller |
| | | | |
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SUMMARY : Extends the sunset date of the low-cost automobile
insurance program, and makes procedural and clarifying changes
to the assigned risk plan. Specifically, this bill :
1)Extends until January 1, 2016 the sunset date of the low-cost
automobile insurance program.
2)Extends until January 1, 2016 the sunset date on the proof of
financial responsibility requirement to drivers in the County
of Los Angeles and the City and County of San Francisco.
3)Eliminates the requirement to publish a notice of a public
hearing in a newspaper located in the City of San Francisco
and a newspaper located in the City of Los Angeles whenever
the Insurance Commissioner (IC) proposes to amend the
"assigned risk plan." The assigned risk plan is the plan
adopted by the IC that requires all automobile insurers to
accept an equitable share of applicants who are unable to
purchase insurance through the normal channels.
4)Requires the manager of the assigned risk plan to ensure
access at no cost to the user as part of the electronic
effective date procedure, rather than requiring the manager to
maintain a toll-free number as part of this procedure.
5)Requires the electronic effective date procedure to include a
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procedure to prevent fraudulent applications, rather than
requiring the reference number or a verification code on the
application.
6)Provides that in order for the insurance coverage to be
effective on the day the application is transmitted through
the plan's electronic effective date procedure, the
application forms and deposit shall be submitted to the plan
manager no later than two days after the forms are completed.
The mailing date would be established in accordance with the
procedure established by the plan.
7)Provides that if the application is made without using the
electronic effective date procedure, the insurance coverage
shall be effective in accordance with an alternative procedure
established by the plan.
8)Requires the plan to establish a procedure for the maintenance
of appropriate records of risks in order to provide evidence
of the requested effective date of insurance coverage, rather
than specifying in statute the types of evidence required for
the effective date.
9)Requires the application form to contain a notice advising the
applicant that coverage is not effective unless the agent or
broker has transmitted the application within two days of its
completion, and that failure to do so can delay the effective
date of the insurance coverage.
10)Eliminates the requirement that the IC's outreach plan on
low-cost automobile insurance contain the most recent report
to the Legislature on the status of the low-cost automobile
insurance program from the California Automobile Assigned Risk
Plan.
EXISTING LAW :
1)Sunsets the low-cost automobile insurance program on January
1, 2011.
2)Authorizes the IC to approve amendments to the assigned risk
plan after holding a public hearing to determine whether the
amendments are in keeping with the intent of this law.
AB 1597
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3)Requires the notice of the public hearing to consider
amendments to the assigned risk plan to be published at least
60 days before the hearing in two newspapers of general
circulation, including one in the City of San Francisco and
another in the City of Los Angeles.
4)Requires the manager of the assigned risk plan to maintain a
toll-free telephone number as part of the electronic effective
date procedure.
5)Requires the producer of record to maintain appropriate
records of all insured risks in order to provide evidence of
the requested effective date of coverage. This evidence shall
consist of the completed applications, eligibility
certification forms, a mail log, a check copy, a check
register, a receipt, and other records created
contemporaneously with the application.
FISCAL EFFECT : Minor and absorbable costs to DOI to modify
reporting requirements and continue oversight of the low cost
automobile insurance program.
COMMENTS :
1)The primary purpose of this bill is to extend the sunset date
of the Low-Cost Automobile Insurance Program until January 1,
2016, in order to ensure that low-income, good drivers will
continue to have access to affordable auto insurance.
2)California law requires motorists to purchase auto insurance
or to be otherwise financially responsible. Motorists benefit
when all drivers carry insurance. The low-cost automobile
insurance program was created to make available low-cost
liability insurance to "good drivers" who demonstrate
financial need and have reached age 19. A good driver is
defined as having:
a) No more than one at-fault property damage accident or no
more than one point for a moving violation (cannot have one
of each);
b) No at-fault auto accident involving bodily injury or
death within the past three years; and,
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c) No felony or misdemeanor conviction for a violation of
the California Vehicle Code.
Originally created in 1999 for drivers in Los Angeles and San
Francisco, the program has been extended statewide since 2007
(SB 171 Escutia, Chapter 794, Statutes of 1999; SB 527 Speier,
Chapter 807, Statutes of 1999; and SB 20 Escutia, Chapter 435,
Statutes of 2005). Annual auto insurance premiums are set by
county and currently range from $161 to $368 per year. The
premium rates are set by a public rate-setting process. The
DOI uses a 5-cent assessment on every insured vehicle in the
state toward this program's consumer education and outreach
campaign.
In 2009, the program experienced a 19% in demand, attributed
chiefly to the economic downturn. The low-cost automobile
insurance program has provided approximately 50,000 policies
since its inception, and had 11,439 policies in force during
the reporting period ending December 31, 2009.
3)According to the author and the sponsor, the DOI, this bill
enables good drivers to purchase insurance with lower coverage
requirements than are available on the open market, which
often allows premiums to be lower. These policies are
required to be actuarially sound, to be sold by licensed
private insurance agents, and to be underwritten by private
insurance companies. The proponents also state that as a
result of the consumer education and outreach efforts made on
behalf of the low-cost auto program, consumers are informed
about higher levels of coverage available from regular
policies that may cost the same, less, or only slightly more.
In some instances the consumer chooses the standard policy
with the higher coverage benefits.
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086
FN: 0004090