BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  SB 1273
                                                                  Page  1

          Date of Hearing:   August 6, 2014

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

                    SB 1273 (Lara) - As Amended:  August 4, 2014 

          Policy Committee:                             InsuranceVote:10-1

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              No

           SUMMARY  

          This bill expands eligibility criteria for the Low-Cost  
          Automobile Insurance Program (LCAP), extends the program sunset  
          date for an addition five years to 2020, increases the  
          commission paid for LCAP policies, and generally updates  
          provisions governing the LCAP.  

           FISCAL EFFECT  

          Minor administrative costs, less than $50,000 (Insurance Fund),  
          to the California Department of Insurance to modify policies and  
          comply with reporting and consumer information requirements.

           COMMENTS  

           1)Background  . California law requires that all drivers of  
            vehicles within the State maintain evidence of financial  
            responsibility. The LCAP was established as a pilot program in  
            1999; since late 2007, it has been available statewide. The  
            LCAP provides income eligible persons with liability insurance  
            protection at affordable rates as a way to meet California's  
            financial responsibility laws.

           2)Program Funding.  Current law authorizes the Insurance  
            Commissioner, upon appropriation, to use $0.05 of a $0.25  
            special purpose assessment on each vehicle insured in the  
            state, in order to inform consumers about the program. The  
            LCAP consumer outreach program has a budget of about $1.4  
            million, the majority of which is for advertising contracts. 

            Aside from the consumer information funding described above,  
            the LCAP program does not receive direct state funding. Rates  








                                                                  SB 1273
                                                                  Page  2

            for LCAP are required to be set in order to cover losses. The  
            program is viable because the LCAP policies have coverage  
            limits lower than the state otherwise required.  These lower  
            limits that are deemed to satisfy the financial responsibility  
            law for participants who meet eligibility requirements, which  
            include low income, a vehicle valued at under $20,000, and a  
            good driving record. 

           3)Staff notes  the special assessment providing funding for LCAP  
            consumer outreach is only in place until January 1, 2016.  In  
            order to continue the consumer outreach function beyond this  
            date, the sunset on the assessment must be extended or  
            eliminated before that date.

           Analysis Prepared by  :    Lisa Murawski / APPR. / (916) 319-2081