Panel OKs Insurance Bill Cutting Costs for Low-Income Drivers

Amid signs that a bipartisan agreement is in the works, a state Senate committee on Monday approved legislation described as the best way to provide affordable automobile insurance for low-income Californians.

The bill, sponsored by Assembly Speaker Willie Brown (D-San Francisco), is still strongly opposed by the insurance industry, which has labeled it an unworkable sham that could cause rates to rise for a majority of the state’s motorists.

But one key Republican voted for Brown’s bill in the Senate Insurance, Claims and Corporation Committee on Monday and another GOP lawmaker said he was close to supporting the measure. Members of both parties indicated that it is nearly in a form that could obtain a signature from Gov. George Deukmejian, who has not taken an official position on the bill.

“Between now and the next 48 hours, we will be able to reach an accord with the governor,” predicted Sen. Alan Robbins (D-Tarzana), the committee chairman, who has joined Brown in negotiations on the issue. “We are very close to cutting a deal.”

The bill would require insurance companies to offer, for $25 a month, a policy providing minimum coverage for good drivers whose income does not exceed $25,000 for a family of four. The policy would also be available to people 55 or older with incomes of $30,000 or less.

Brown maintains that the rates outlined in his bill are sufficient to pay the costs of the low-income policy without a subsidy. But his measure contains provisions allowing the price of the policy to rise or the coverage to be narrowed if the plan does not work as envisioned.

Potential Subsidy Source

A potential source of subsidy for the low-cost policy would be savings produced by requiring all motorists to purchase insurance before registering their cars. Brown estimates that this requirement, which is contained in a bill to which his measure’s fate is linked, would reduce the number of uninsured drivers by more than 60%. Premiums that drivers now pay to protect themselves from uninsured motorists would be redirected to subsidize the low-income policies.

The mandatory insurance requirement would be enforced through the use of a computer hook-up between insurance companies and the Department of Motor Vehicles. This would enable the state to more strictly enforce the requirement and prevent drivers from insuring their cars one day only to register them and then drop the insurance the next day.

“If you fail to pay, and the insurance company cancels the policy, as soon as they cancel you, their computer immediately notifies DMV,” Robbins said. “The DMV computer will then spew out a letter that says ‘Sorry, your registration has been canceled.’ ”

GOP Support

Sen. John Doolittle (R-Rocklin), chairman of the Senate Republican Caucus, who voted for the bill, said Republicans are likely to support the measure because it is the best way to follow up on Proposition 103, the insurance regulation initiative approved by voters last year.

Doolittle said the Republicans, who in the past have sided with the industry, are eager to “solve some problems” and Brown’s bill seems like a good place to start.

“It’s a compromise, but it is a compromise that seems to advance the interests of Californians,” Doolittle said. “The insurance industry representatives are going to have to recognize the new climate we’re in now.”

But industry representatives continued to insist that they, and perhaps other California drivers, will be stuck paying the bill if Brown’s measure becomes law. They said the savings projected by Brown will not materialize.

“The basic, underlying philosophy of this bill is flawed,” said Tom Conneely, president of the Assn. of California Insurance Cos. “It attempts to do things that cannot be done. There is nothing you can do with this bill to make it work.”