BILL ANALYSIS �
AB 1024
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Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 1024 (Hueso) - As Amended: April 28, 2011
SUBJECT : Low-Cost Automobile Insurance
SUMMARY : Authorizes insurance agents and brokers to sell
low-cost auto insurance through an Internet website, and
requires the California Automobile Assigned Risk Plan (CAARP) to
contract with a certified producer to operate a website to sell
low-cost auto insurance policies. Specifically, this bill :
1)Authorizes a CAARP-certified "producer" (i.e., insurance agent
or broker) to accept and process applications to purchase
low-cost automobile insurance policies through an Internet
Website.
2)Specifies that any consumer information required by this bill
may be accepted by electronic means after the Department of
Insurance (DOI) adopts rules and only if the information is
submitted in accordance with the rules.
3)Requires CAARP to coordinate with the DOI to develop a system
for receiving and assigning policies issued through Internet
websites.
4)Authorizes CAARP to request, and the DOI to include in an
annual plan, up to $50,000 from the DOI's existing consumer
outreach fund to be used for the purpose of implementing the
above provisions.
5)Requires CAARP to contract with a certified producer to
develop and maintain a website dedicated to accepting and
processing low-cost automobile insurance policies. This
contract would be subject to the approval of the Insurance
Commissioner (IC). The website would be known as the Primary
California Low-Cost Auto Insurance Web Site.
6)Authorizes CAARP, with the approval of the IC, to authorize
the contracted producer to use, for the period of the
contract, the DOI-owned Internet website domain name
http://www.MyLowCostAuto.com , or any other relevant domain
names the DOI controls.
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7)Requires CAARP to ensure that the contractor through the
Primary California Low-Cost Auto Insurance Web Site, does all
of the following:
a) Provides all disclosures and other information
required by law that would otherwise be provided by the
producer;
b) Effectively educates consumers about the policy and
its limits;
c) Collects any documents that are necessary for
determining qualifications for the policy, if any;
d) Has a system for creating an electronic
certification of the information provided by the
consumer;
e) Maintains safeguards to ensure that consumer
information provided through the Internet Website is
secure;
f) Provides the physical address of the producer and
both telephonic and electronic contact information of the
producer;
g) Provides contact information including the website
addresses for other CAARP certified producers, in order
to offer prospective policyholders the opportunity to
apply for the policy through a local producer;
h) Provides contact information for the Consumer
Services Division of the DOI; and
i) Adheres to any other rules and provides any other
information required by regulations adopted by the DOI to
promote the purposes of this bill.
8)Requires the Primary California Low-Cost Auto Insurance Web
Site to accept payment by credit or debit card or other form
of electronic payment the Department of Insurance determines
to be appropriate. The website shall also provide a mechanism
for payment by check.
9)Requires that any consumer who does not qualify for the
low-cost automobile insurance policy be given an option to be
directed to the DOI's auto insurance premium comparison
Internet Web page.
10)Requires the contractor, in consultation with CAARP, to make
the Primary California Low-Cost Auto Insurance Web Site
available in as many languages as is feasible, but this shall
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include English and Spanish.
11)Requires CAARP to solicit the contract to develop and
maintain the Primary California Low-Cost Auto Insurance Web
Site via an open bidding process once the IC approves the
request.
12)Authorize CAARP to request, and the DOI to include in its
annual plan, up to $100,000 from DOI's existing consumer
outreach fund to be made available for the development of the
Primary California Low-Cost Auto Insurance Web Site.
13)Provides that an applicant shall not be required to provide a
copy of the applicant's or other household members' driver's
licenses if the DOI finds that there is another suitable means
of verifying the drivers' licensure.
EXISTING LAW :
1)Establishes a Low-Cost Automobile Insurance Program within
CAARP that is authorized to operate in all counties of the
state.
2)Requires the low-cost automobile insurance policy to offer
$10,000 coverage for bodily injury or death of each person per
accident, and $20,000 coverage for bodily injury or death of
all persons per accident, and $3,000 for property damage to
others per accident.
3)Limits the coverage to vehicles with a value of $20,000 or
less.
4)Requires that the rates for policies shall be sufficient to
cover losses incurred under these policies and the necessary
expenses including administrative, underwriting, taxes,
commissions, and claims adjusting costs that are incurred due
to participation in the low-cost automobile insurance program.
5)Specifies the following eligibility requirements in order for
a person to participate in the program:
a) The person resides in a household with a gross
income that does not exceed 250 percent of the federal
poverty level;
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b) The person is 19 years of age or older and has been
continuously licensed to drive during the previous three
years;
c) The person does not cause more than one
property-damage-only accident, or have more than a point
for a moving violation, within the previous three years;
d) The person does not have on record within the
previous three years an at-fault accident involving
injury or death;
e) The person does not have a felony or misdemeanor
conviction for a violation of the Vehicle Code; and
f) The person is not a college student claimed as a
dependent of another person for federal or state income
tax purposes.
6)Authorizes an application to participate in the program to be
made through any insurance producer certified by the Plan.
7)Requires each applicant, in order to demonstrate financial
eligibility to purchase a low-cost automobile insurance
policy, to present a copy of their federal or state income tax
return for the previous year or other reliable evidence from a
governmental agency or governmental means-tested program
pursuant to regulations adopted by the IC.
FISCAL EFFECT : Undetermined.
COMMENTS :
1)Background . The Low-Cost Automobile Insurance Program has
provided more than 59,000 Californians with affordable auto
insurance since its inception. There were 11,516 policies in
force at the end of 2010. Current law authorizes agents and
brokers to offer low-cost auto insurance policies in addition
to regular auto policies. The DOI reports that two-thirds of
new policies assigned were to applicants who were uninsured at
the time of the application, and that the predominant vehicle
value was less than $5,000.
The DOI also reports that visitors to the Department's website
are provided immediate access to agents or brokers in their
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area, while agents and brokers are being encouraged to use an
online application system to reduce application errors.
Additionally, the DOI has established a new website at
www.mylowcostauto.com along with paid advertising and related
publicity in targeted areas to promote the Program.
2)Support . The author states that while current law permits
licensed brokers to sell low-cost auto insurance, it does not
allow on-line processing or sales of this insurance. This
bill would authorize both the processing and sale of low-cost
auto insurance through an authorized website. Consumer
Watchdog states this will not only enable more uninsured
drivers attain the minimum level of coverage required by law,
but it will also help achieve the goal of that law: to reduce
the number of uninsured drivers.
3)Opposition. The Insurance Brokers & Agents of the West (IBA
West) states that this bill, by contracting with a single
agent or broker to establish an official website to sell
low-cost auto insurance, would establish a bad precedent that
could then be expanded to other residual market products such
as assigned risk automobile insurance or fire and homeowners
insurance policies sold through the California FAIR Plan. In
essence, such a plan establishes the regulator and his or her
appointee, i.e., CAARP, as a competitor to licensed insurance
agents and brokers. IBA West states that it is not opposed to
allowing independent insurance agents to market and sell low
cost automobile insurance policies via the Internet. Also,
IBA West would not oppose establishing an official low cost
automobile Internet web site to provide consumers with
information about this important program and to provide an
agent and broker locator so consumers can find certified
insurance sales persons from whom they can purchase the low
cost policy.
4)Possible amendment? In light of the opposition's concern that
one provision of this bill would authorize an official website
to compete with licensed insurance agents and brokers, in lieu
of Section 2 of the bill, would the author consider an
amendment to establish an official low cost auto insurance
website where consumers could obtain information about this
program and be immediately referred to a licensed insurance
agent or broker who could answer questions and sell the low
cost policies?
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REGISTERED SUPPORT / OPPOSITION :
Support
Consumer Watchdog
Opposition
American Agents Alliance
Insurance Brokers & Agents of the West
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086