BILL ANALYSIS
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THIRD READING
Bill No: AB 1597
Author: Jones (D), et al
Amended: 4/13/10 in Assembly
Vote: 21
SENATE BANKING, FINANCE, AND INS. COMMITTEE : 10-0, 6/30/10
AYES: Calderon, Cogdill, Correa, Florez, Kehoe, Liu,
Lowenthal, Padilla, Price, Runner
NO VOTE RECORDED: Cox
SENATE APPROPRIATIONS COMMITTEE : 9-0, 8/2/10
AYES: Kehoe, Alquist, Ashburn, Corbett, Emmerson, Leno,
Wolk, Wyland, Yee
NO VOTE RECORDED: Price, Walters
ASSEMBLY FLOOR : 74-3, 5/13/10 - See last page for vote
SUBJECT : Automobile insurance: assigned risk plans
SOURCE : Department of Insurance
DIGEST : This bill extends the California low-cost auto
program sunset from 2011 to 2016 and makes various
statutory changes to conform its operations to standard
California administrative practices and facilitate greater
efficiency and more customer-friendly operations for the
public and producers alike.
ANALYSIS :
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Existing Law
1. The California Automobile Assigned Risk Plan operates
the California Low-Cost Automobile Insurance program
which provides an affordable auto insurance option for
low-income good drivers in California and since December
2007 the program has been available to qualifying
motorists in all 58 counties.
2. To qualify for a low-cost policy, household income
cannot exceed 250 percent of the federal poverty level,
the driver must be a "good driver" as defined by law,
and the applicant must be a state resident 19 years of
age or older meeting other criteria too. The program
offers policy limits prescribed by law of $10,000 for
bodily injury or death per person in an accident,
$20,000 for bodily injury or death per accident, and
$3,000 property damage for each accident with premium
that vary by county; installment options are available.
3. Requires that access to the plan for an immediate date
be provided via a tool-free number and specifies the
procedure for establishing an electronic effective date
shall be established by the plan.
4. The Insurance Commissioner is required to adopt a plan
for operation of the program, including the
apportionment of the costs of this program equitably
among admitted liability insurers, following a public
hearing conducted as provided under this law, which
includes a special requirement for a notice to be
published in two newspapers in Northern and Southern
California at least 60 days prior to the hearing or
close of public comment.
5. This program is due to sunset on January 1, 2011.
This bill:
1. Deletes the special notice procedural requirement of the
current low-cost auto program law and subjects it
instead to the standardized provisions and procedures of
the Administrative Procedures Act.
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2. Makes various procedural changes that support technology
and other operational improvements to make
administration of the California Low-Cost Automobile
Insurance program faster and more convenient for
producers and public alike and makes other technical
changes.
3. Extends the sunset from January 1, 2011 to January 1,
2016.
Background
The California Low-Cost Automobile (CLCA) Insurance program
has expanded from its inception in 1999. Starting as a
pilot program in Los Angeles and San Francisco counties
pursuant to SB 171 (Escutia), Chapter 794, Statutes of
1999, and SB 527 (Speier), Chapter 807, Statutes of 1999.
In 2005,
SB 20 (Escutia), Chapter 435, Statutes of 2005, authorized
its eventual expansion to all counties in California at the
discretion of the Insurance Commissioner. The 2005 bill
mandated that as of April 1, 2006 it should be extended to
Alameda, Fresno, Orange, Riverside, San Bernardino and San
Diego Counties. The program was available in all
California counties by December 2007.
Information provided by the Department of Insurance
indicates that in 2008, 77 percent of all policies issued
went to applicants with a yearly household income of, or
below, $20,000.
In 2008, of the 7,892 applications received, 6,306 were
assigned.
While the program specifies an applicant's vehicle cannot
exceed $20,000 in value at the time of their application
for insurance, in 2008, most vehicles insured had a value
of less than $5,000.
Statistics provided by the program administrator, the
California Automobile Assigned Risk Plan, indicate that in
2008, 70 percent of new policies went to applicants who
were uninsured at the time of application.
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A study of the Insurance Research Council, "Uninsured
Motorists, 2008 Edition", finds a strong correlation
between the percent of uninsured motorists and the
unemployment rate. It estimates that a one percentage
point increase in the unemployment rate is associated with
three-quarters of one percent increase in the uninsured
motorist rate. Consequently, based on current unemployment
trends, the percentage of uninsured motorists in California
and other states is expected to rise.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
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
SUPPORT : (Verified 8/3/10)
Department of Insurance (source)
California Communities United Institute
Consumer Attorneys of California
Consumer Federation of California
Consumer Watchdog
ARGUMENTS IN SUPPORT : This bill is sponsored by the
Department of Insurance (DOI) to extend the low-cost auto
program sunset from 2001 to 2016. The DOI indicates the
extension of this program will ensure that low-income, good
drivers will continue to have access to affordable auto
insurance. The DOI indicates the program has provided over
50,000 policies since its inception, helping thousands
comply with California law.
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The DOI notes that last year's bill was vetoed by the
Governor who indicated there should be a review of program
results for the purpose of identifying changes to help
ensure its success. In response, the DOI and the
California Low-Cost Automobile Insurance program have
instituted numerous changes to permit electronic
transactions where previously only mail-based transactions
took place and to facilitate more effective and
cost-beneficial public outreach. More specifically, they
report:
Better targeted advertising.
Increased use of an online agent application process to
reduce errors and speed processing.
Immediately providing hotline callers with names of three
qualified agents instead of sending a list through the
mails.
Making other various changes, improvements and
simplifications.
Notwithstanding last year's veto, the DOI has advised the
Legislature that it considers California's Low-Cost
Automobile Insurance program to be successful in meeting
its statutory objectives and a vital program in the current
economic downturn. It reports an 18.9 percent increase in
enrollment in 2009, and indicates numbers for 2010 continue
to be high.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall,
Bill Berryhill, Blakeslee, Block, Blumenfield, Bradford,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes,
Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore,
Hagman, Hall, Hayashi, Hernandez, Hill, Huber, Huffman,
Jeffries, Jones, Knight, Lieu, Logue, Bonnie Lowenthal,
Ma, Mendoza, Miller, Monning, Nava, Nestande, Niello,
Nielsen, V. Manuel Perez, Portantino, Ruskin, Salas,
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Saldana, Silva, Smyth, Solorio, Audra Strickland,
Swanson, Torlakson, Torres, Torrico, Tran, Villines,
Yamada, John A. Perez
NOES: Tom Berryhill, DeVore, Harkey
NO VOTE RECORDED: Norby, Skinner, Vacancy
JJA:mw 8/10/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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