Schwarzenegger Extends Calif. Low Cost Auto Insurance Program

Calif. Gov. Arnold Schwarzenegger has signed legislation – AB 1597 authored by Assemblyman Dave Jones to maintain California’s innovative auto insurance program for low-income Californians with good driving records. The California Low Cost Auto Insurance program (CLCA), which was set to expire this year without AB 1597’s five-year extension, has provided car insurance to more than 50,000 Californians and has seen a surge in policyholders in the wake of the recession and high rates of poverty, according to data from the California Department of Insurance.

The program offers a bare bones policy that is often half the price of the least expensive insurance coverage otherwise available in many communities. The CLCA premium can be as low as $161 per year (in Imperial County) and up to $368 per year (in Los Angeles County.) The prices are set by the Insurance Commissioner to ensure that there is no taxpayer cost for the program and that it does not require a subsidy from drivers who purchase standard auto insurance. To date, an estimated 85 percent of drivers who have purchased the CLCA policy were previously uninsured motorists.

Consumer Watchdog said it has been working with community groups, insurance agents, the City of Los Angeles and the California Department of Insurance to raise awareness about the program. Lack of knowledge of the program among many qualifying drivers combined with a failure of many insurance agents to inform customers about the program, as required by law, has meant that there are thousands of uninsured drivers who could enroll if they were aware of the program, the consumer group said.

A 2008 report by the Insurance Research Council estimated that about 18 percent of California drivers lacked coverage. And according to new census figures, about 5.6 million Californians now live below the poverty line, which is about $22,000 for a family of four.

To qualify for the low-cost auto insurance program, drivers must have no more than one point on their driving record, must be 19 or over, with at least three years driving experience and cannot have an income exceeding $27,075 (or $55,125 for a family of four). Additionally, the insured vehicle must be valued at less than $20,000. The policy includes coverage for $10,000 in bodily injury per person, $20,000 per accident and $3,000 in property damage.

Under the law, every insurance agent in the state is required to inform prospective insurance policyholders about the program, if the driver seeks to purchase a basic auto insurance policy.

Since the inception of the program, approximately 69,760 Californians have applied for the program, with 56,778 of those being accepted. For 2010, approximately 6,028 applications have been received and 5,765 assignments have made it into CLCA.