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PIFC's AB 976 is an Equitable, Low-Cost Auto Insurance Policy

21 April 1999

PIFC's AB 976 is an Equitable, Low-Cost Auto Insurance Policy; Other Offerings Will Result in Unfair Subsidies

    SACRAMENTO, Calif.--April 20, 1999--The Personal Insurance Federation of California (PIFC) is sponsoring a proposal which would make a more affordable auto insurance policy available to low-income motorists in California.
    AB 976 by Assemblyman Dennis Cardoza, D-Merced, is scheduled to be heard in the Assembly Insurance Committee on April 21, 1999. It is designed to provide low-income, good driver families with an affordable auto insurance policy which is required by law.
    "AB 976, unlike other low-cost auto insurance policy legislation being considered this week in the Senate, will not require motorists in one part of the state to subsidize drivers in another part," explained Cardoza.
    Diane Colborn, Senior Legislative Advocate and Counsel for PIFC noted, "The idea for a low-cost insurance policy is not new. PIFC has introduced a low-cost auto bill each year for the past decade. Now it is especially important because California mandates drivers to have auto insurance before they can register their car.
    "Assemblyman Cardoza's bill is an important step toward helping uninsured, good drivers afford insurance," she added. The key components of the bill are:

--   AB 976 offers a lower-limits policy providing up to $10,000 per
     person and $20,000 total per accident in bodily injury liability
     coverage, and $3,000 in property damage liability coverage.

--   To qualify for the policy, a motorist must have a good driving
     record and have an annual income of no more than 150% of the
     federal poverty level.

    "AB 976 is unlike some of the other low-cost proposals introduced; AB 976 does not establish a flat rated policy, and would not require other insured drivers, including low-income drivers, to subsidize the low-cost policy," Cardoza said.
    "There are currently two other low-cost auto insurance policy proposals now being considered by the Legislature, Colborn said. "SB 171 (Escutia) creates a so-called 'lifeline' low-cost auto policy which good drivers who meet a low-income means test would be eligible to purchase for a statewide flat rate of $300.
    "The $300 flat rate is not an accurate price. Any low-cost policy developed should be priced according to the actual cost of providing the coverage. The flat rate will result in drivers in some parts of the state being forced to pay higher rates in order to subsidize lower rates for drivers who purchase the lifeline policy.
    "Minimum requirement auto policies today are already being sold in many areas of the state outside of Los Angeles for less than $300," Colborn continued.
    "PIFC supports the goal of SB 527 (Speier), which creates a low-cost auto policy which low-income, good drivers could purchase to meet the mandatory insurance law. However, SB 527 also calls for one statewide unspecified flat rate to be set for each of two low-cost policies created by the bill -- an "A" policy and an "AA" policy for drivers with especially good driving safety records.
    The policies would be sold through the Assigned Risk Plan at one statewide flat rate," Colborn said. "Because of the flat rate, the premium will, by definition, be excessive for some in the pool and inadequate for others."
    Colborn concluded, "We commend Assemblyman Cardoza for taking the lead in ensuring that whichever low-cost policy is developed by the Legislature, it will be fair to low-income drivers in all parts of the state, and will not require drivers in rural and suburban areas to subsidize rates for urban drivers in southern California."