BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1273|
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UNFINISHED BUSINESS
Bill No: SB 1273
Author: Lara (D), et al.
Amended: 8/4/14
Vote: 21
SENATE INSURANCE COMMITTEE : 9-1, 4/9/14
AYES: Monning, Corbett, Correa, DeSaulnier, Lieu, Mitchell,
Roth, Torres, Vidak
NOES: Nielsen
NO VOTE RECORDED: Gaines
SENATE APPROPRIATIONS COMMITTEE : 4-1, 5/5/14
AYES: De Le�n, Hill, Lara, Steinberg
NOES: Walters
NO VOTE RECORDED: Gaines, Padilla
SENATE FLOOR : 26-7, 5/12/14
AYES: Beall, Block, Cannella, Corbett, Correa, De Le�n,
DeSaulnier, Galgiani, Hancock, Hernandez, Hill, Hueso,
Jackson, Lara, Leno, Lieu, Liu, Mitchell, Monning, Padilla,
Pavley, Roth, Steinberg, Torres, Vidak, Wolk
NOES: Anderson, Berryhill, Fuller, Huff, Morrell, Walters,
Wyland
NO VOTE RECORDED: Calderon, Evans, Gaines, Knight, Nielsen,
Wright, Yee
ASSEMBLY FLOOR : 60-15, 8/14/14 - See last page for vote
SUBJECT : Insurance: low-cost automobile insurance program
SOURCE : Department of Insurance
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DIGEST : This bill extends, until January 1, 2020, the sunset
date on the Low-Cost Automobile Insurance Program (LCAP);
expands eligibility criteria to include drivers with less than
three years of continuous driving experience and assesses a
surcharge on those drivers; and makes other changes designed to
increase participation.
Assembly Amendments add a coauthor, specify requirements for
rate payments, changes and increases after January 1, 2017,
specify producer commissions, task the Insurance Commissioner
(IC) and the California Automobile Assigned Risk Program (CAARP)
Advisory Committee with various duties related to the
administration of CAARP including the development of a
consumer-friendly Internet Web site, and make conforming
changes.
ANALYSIS :
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; and
C. $5,000 for property damage.
3. Permits an undocumented resident to obtain a driver's license
if he/she can provide satisfactory proof of residency and can
meet all the other qualifications for a driver's license.
4. Establishes within CAARP, LCAP to provide low income drivers
with a more affordable insurance policy to satisfy the
financial responsibility requirement.
5. Requires LCAP policies provide the following coverage:
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A. $10,000 for injury to a single person;
B. $20,000 for injury to two or more people in the same
accident; and
C. $3,000 for property damage.
6. Permits, generally, individuals with good driving records and
income below 250% of the poverty level to purchase insurance
through the LCAP.
7. Restricts LCAP policies to vehicles with a value of $20,000
or less at the time of purchase.
8. Permits LCAP to offer installment payment plans if the
purchaser pays at least 15% of the premium when the policy is
issued.
9. Requires LCAP to submit its rate plans to the IC for approval
every year.
10.Restricts the sales commission paid to insurance agents for
LCAP policies to $35.
11. Provides that an LCAP policy can be cancelled for:
A. Non-payment of premium;
B. Fraud; or
C. Purchase of additional automobile insurance above the
LCAP policy limits.
12.Requires the CAARP board to establish a website for LCAP that
refers consumers to a participating agent and allows
consumers to purchase an LCAP policy online.
13.Sunsets the LCAP effective January 1, 2016.
This bill:
1. Increases the maximum value of a vehicle that can be insured
in a LCAP from $20,000 at the point of purchase to $25,000
based on current valuation used by the Department of Motor
Vehicles for calculating the vehicle license fee.
2. Permits a driver to purchase insurance from LCAP if the
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driver pays an additional surcharge and is any of the
following:
A. An undocumented resident with a driver's license and
less than three years of driving experience;
B. A driver with less than three years of driving
experience; or
C. A driver who has not been continually licensed to drive
for the past three years.
3. Increases the minimum initial payment required for an
installment plan from 15% to 20% of the premium, and increase
the number of installment payments from six to seven.
4. Requires LCAP to make an annual rate filing with the IC
between January 1, 2015, and January 1, 2016. Thereafter,
requires LCAP to make a rate filing with the IC when the
annual rate will increase or decrease by more than 7%.
5. Increases the commission paid for selling an LCAP policy to
the greater of 12% of premium or $50.
6. Requires the CAARP Advisory Committee to report to the IC on
the following proposals:
A. Allowing a driver to reinstate a lapsed LCAP policy;
B. Allowing LCAP premium installment payments to be made
with debit or credit cards;
C. Allowing economically independent drivers under the age
of 19 to purchase an LCAP policy; and
D. Allowing families to keep an LCAP policy if they add a
driver under the age of 19.
7. Revises the statutory requirements for the LCAP Internet Web
site.
8. Extends the LCAP sunset date to January 1, 2020.
9. Repeals obsolete language relating to the formation of the
LCAP.
Background
Private passenger automobile insurance protects the owner of the
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vehicle, the driver, passengers, and any person potentially
injured by an accident involving the insured vehicle or person.
It basically provides some resources in making an injured party
"whole"; without auto liability coverage, injured parties may
receive nothing to assist in the payment of medical costs, lost
wages, etc., and may be stuck paying the bills themselves.
Since 1974, existing law has required drivers to carry liability
coverage for bodily injury or death of at least $15,000 for each
person up to $30,000 as well as coverage for property damage of
least $5,000 per accident.
The problem of uninsurance plagues the entire nation and a lack
of affordable liability coverage hits low-income drivers the
hardest. The Department of Insurance (DOI) estimates that there
are approximately three million cars on the road that are
uninsured, or roughly one in ten. A March 2014 study by the
Consumer Federation of America, Uninsured Drivers: A Societal
Dilemma in Need of a Solution, explains that the data available
"conclusively show that lower-income drivers are far more
likely, than higher income motorists, to drive without liability
coverage."
CAARP was originally created in 1947, to provide insurance to
those who could not otherwise acquire it due to a poor driving
record. Applicants for the CAARP coverage are assigned randomly
to auto insurers based on each insurer's portion of the
voluntary market. Its primary impact has evolved over the
years, eventually becoming a primary source of low-cost
insurance. (See the Senate Floor Analysis to SB 429 (Lewis,
1993-94 Legislative Session)
In 2000, two LCAP pilot programs were established within CAARP
in Los Angeles and San Francisco Counties. Since then the LCAP
has been expanded to all counties, and according to the DOI,
more than 73,000 people have been covered by affordable auto
insurance through the program. Last year the LCAP experienced a
22% increase from 2012. At the end of 2013, 11,521 LCAP
policies were in force.
Comments
According to the author's office, this bill reforms and enhances
the LCAP program to provide income eligible drivers with
affordable automobile liability insurance. Insurance industry
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estimates state that approximately 15% of the cars on the road
do not have insurance for various reasons, with cost being one
of them. Although the numbers of applications are up, it is
estimated that only 10% of low income individuals currently
qualify for the low cost program. The limit on the value of an
automobile that can be insured through the program excludes
Californians who are just over the threshold but still have
lower annual incomes.
The LCAP program will face a sunset provision that terminates
the program as of January 1, 2016. Also, the eligibility
criteria that requires at least three years of previous driving
experience excludes many new low-income drivers as well as the
estimated 1.4 million newly licensed drivers now eligible.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, minor
administrative costs to the DOI (Special Fund).
SUPPORT : (Verified 8/14/14)
California Department of Insurance (source)
California Catholic Conference, Inc.
California Immigrant Policy Center
Coalition for Humane Immigrant Rights of Los Angeles
Coalition of California Welfare Rights Organizations
Consumer Federation of California
Friends Committee on Legislation of California
Greenlining Institute
Personal Insurance Federation of California
ASSEMBLY FLOOR : 60-15, 8/14/14
AYES: Achadjian, Alejo, Ammiano, Bloom, Bocanegra, Bonilla,
Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau,
Chesbro, Cooley, Dababneh, Daly, Dickinson, Eggman, Fong, Fox,
Frazier, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gray, Hagman,
Hall, Roger Hern�ndez, Holden, Jones-Sawyer, Levine, Linder,
Lowenthal, Maienschein, Medina, Mullin, Muratsuchi, Nazarian,
Nestande, Pan, Perea, John A. P�rez, V. Manuel P�rez, Quirk,
Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner,
Stone, Ting, Weber, Wieckowski, Williams, Yamada, Atkins
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NOES: Allen, Bigelow, Dahle, Donnelly, Beth Gaines, Grove,
Harkey, Jones, Logue, Mansoor, Melendez, Patterson, Wagner,
Waldron, Wilk
NO VOTE RECORDED: Ch�vez, Conway, Gorell, Olsen, Vacancy
AL:d 8/14/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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