Car Insurers Push for Easier Cancellations

Car insurance companies would find it much easier to cancel or not renew motorists’ coverage for what are now considered minor traffic violations under proposed state regulations that received their first public hearing Monday.

The proposals--already sparking heated debate between insurance industry interests and consumer advocates--would change the way insurers can count speeding tickets and other violations against a driver’s record and would allow immediate cancellation for a list of offenses related to alcohol, speed modifications and one-car accidents.

Motorists dropped under such rules would probably be forced to scramble for more expensive, harder-to-find, high-risk coverage.

Insurance companies and the California Department of Insurance say the new regulations are needed to ensure that good drivers do not subsidize bad drivers, and that they should result in lower premiums for better drivers.

Insurers say the new regulations would give them a chance to write coverage that appropriately reflects the risk they are taking with motorists who drive too fast, drink and drive, or modify their cars for greater speed.

“There’s a substantial increase in the risk of insuring that driver . . . far beyond the risk that the insurer originally undertook,” said Jeff Fuller, general counsel for the Assn. of California Insurance Companies, a trade group. “Giving the insurers legitimacy to non-renew or cancel forces a renegotiation” so that a driver’s premiums accurately reflect the risk.

Consumer advocates, however, say the changes give insurance companies too much freedom to cancel or not renew policies.

“This really doesn’t have to do with bad drivers; it has to do with ordinary drivers,” said Lillian Salinger, staff attorney for the Proposition 103 Enforcement Project, a consumer advocacy group. “And once you’ve been canceled, it’s a lot more difficult to find insurance and, if you do find it, it will be at a lot higher cost.”

Insurers already can choose not to renew policies of those convicted of drunk driving. In addition, insurers can opt not to renew any driver who accumulates three “points” in three years--with a moving violation such as a speeding ticket counting for one point and an at-fault injury accident for two points--if two of the three points are earned in the past year.

Under the proposed regulations, aired during a public hearing in San Francisco, the “two points in one year” requirement would be eliminated, meaning an insurer could opt not to renew a policy for anyone who received three points worth of violations in three years, said Jack Hom, an insurance department attorney and hearing officer for the proposed regulations.

Any one of a number of alcohol-related violations that are now considered one-point offenses--such as having an open container of alcohol inside a car, drinking while driving or being a minor in possession of alcohol in a vehicle--would become a two-point violation that could result in immediate cancellation for drivers who don’t qualify for good-driver discounts, Hom said. For drivers who do qualify for the discounts, the offenses would continue to count as one point.

Even if a driver were not convicted of drunk driving, an insurer could drop the policy if the company determined that the driver was under the influence or if the driver registered a blood alcohol level of 0.10% or above in a sobriety test, Hom said.

The regulations also would allow companies to cancel any driver who illegally added hydraulics or modified a car’s speed control equipment, as well as any driver involved in a one-car, loss-of-control accident if the insurance company determined that reckless driving was involved.

The proposals are subject to further public comment and reviews by state Insurance Commissioner Chuck Quackenbush and the state’s Office of Administrative Law. That process could take several months.

Consumer advocates say the insurance companies are already too capricious about assigning fault and that the new regulations would give them too much additional power.

The Proposition 103 project gave examples of consumers who were assigned at-fault points because an insurer did not want to fight another driver’s claim, and said the regulations could force thousands of drivers to search for expensive, high-risk insurance.

“It’s like poison ivy. Insurance companies don’t want to touch you if you’ve been canceled,” said Phil Roberto, a spokesman for the Proposition 103 Enforcement Project.

The insurance industry’s Fuller said the regulations would not result in widespread cancellations or non-renewals.

A driver found to be driving recklessly after a one-car accident, for example, may be dropped by one insurer but likely would be picked up by another willing to take on more risk, he said.

“I don’t think it becomes an uninsurable risk, but your insurance rates are going to reflect it for awhile,” Fuller said.