New Program Offers Car Insurance for Low-Income Drivers

In a move to provide affordable auto insurance, state Sen. Martha Escutia (D-Montebello) and consumer advocates announced Friday a trial low-cost insurance program for the working poor of Los Angeles County.

Created through legislation written by Escutia, the Low-Cost Auto Policy Pilot Program requires insurance companies to underwrite a $450-per-year policy for low-income drivers in Los Angeles County. (Unmarried men under age 25 must pay a 25% surcharge for a total of $562.50.)

To qualify, a driver must have a good driving record and earn no more than 150% of the federal poverty level. The qualifying income for a family of four, for example, would be $25,575 per year or less.

The low-cost policy satisfies the state’s mandatory auto insurance laws.

At least 500,000 low-income motorists in the county will qualify for the insurance, according to the Foundation for Taxpayer and Consumer Rights, which sponsored Escutia’s legislation.

The policy is available starting today.

Consumer advocates say that many low-income drivers can’t afford vehicle insurance, leaving them with no other choice but to drive without insurance, which is illegal, or rely on public transportation. The new policy--which will be available through a three-year pilot program--will help reduce the number of uninsured drivers by making insurance affordable, advocates say.

About one in three drivers in Los Angeles County--an estimated 1.8 million people--is uninsured and about 70% are low-income, according to a Department of Insurance study. Los Angeles County is home to nearly 40% of the state’s uninsured motorists.

“This will allow low-income drivers to come out of the dark, so they don’t have to break the law,” Escutia said at a news conference Friday.

In South-Central Los Angeles, for instance, the average liability insurance premium is more than $1,000 per year, she said. The new $450-a-year premium will yield big savings for the poor and remove an employment barrier, Escutia said, since many can’t get to jobs without cars.

Under the program, insurance companies are expected to break even on the policies. But supporters hope that as more uninsured motorists buy the policies, the costs of providing coverage against uninsured motorists will drop, resulting in lower rates for all drivers.

“This program has broad benefits,” said Doug Heller, a consumer advocate at the Foundation for Taxpayer and Consumer Rights.

But some in the industry wonder whether the low-cost policies will appeal to their target audience. “Will someone who lives at or near the poverty level make the choice to spend $450 on insurance, or decide that maybe food is better?” asked Candysse Miller, executive director of the Insurance Information Network of California, which represents 15 major insurers.

Heller countered that uninsured drivers keep one eye on the road and the other looking out for police. The fines for driving without insurance can be $500. “Most people want to comply,” he said. “They just haven’t been able to afford it.”

Low-income drivers can buy the new plan from most insurance agents, or they can call (800) 622-0954.