State Tries to Find Low-Cost Auto Insurance Solutions
Everyone agrees that California’s Low-Cost Automobile Insurance program is a flop. What exactly to do about it is another matter.
That was the verdict of a public hearing Thursday in Los Angeles, where representatives of the insurance industry, consumer groups and community organizations charged that the program’s promotional campaign has failed to reach the public, and that the coverage it provides is substandard and too expensive.
The extent of the problem is indicated by the program’s low participation rates, critics said. According to a 1998 California Department of Insurance report, 1.8 million vehicles in Los Angeles County--almost one-third of the total--are uninsured. But since the low-cost insurance program started last July, only 850 Angelenos have bought the coverage.
“It’s a terribly serious problem,” said State Insurance Commissioner Harry Low.
Low said he is considering a range of solutions for the program, which was designed as a way for low-income drivers to obtain auto insurance. One option: an infusion of cash from the state, possibly through increased vehicle registration fees.
The four-year pilot program was created by legislation written by state Sens. Martha Escutia (D-Whittier) and Jackie Speier (D-Hillsborough). It required insurance companies to offer coverage costing about $450 a year for residents of Los Angeles and $410 for San Franciscans.
Critics at the hearing complained that the insurance was still too expensive for the people it was supposed to help, especially since it didn’t cover medical expenses or loss of wages if the policyholder was injured in a traffic accident and unable to work.
“Considering you don’t get any of that, it does seem a little pricey,” said Janine R. Gibford, a spokeswoman for the Assn. of California Insurance Companies.
Observed Cesar Motts, a district director in Escutia’s office: “If your choice is between paying your auto insurance or feeding your family, most people will choose feeding their family.” Escutia initially wanted a $300 premium but agreed to a higher price under intense pressure from the insurance industry, Motts said.
The low-cost insurance is available to people 19 or older with annual income of no more than 150% of the poverty level--$20,945 for a family of three or $13,885 for an individual.
The program is structured so that the state picks up the tab for administrative costs, including advertising, while the insurance companies share the cost of covering participants.
Responding to criticism that insurance agents have done little to promote the low-cost premiums, Long Beach agent Joe A. Hernandez Jr. said he is legally obligated to present a range of options, and that the low-cost policy is “looked at as an inferior product.”
Several options for improving the program were voiced, including lowering the cost of the policy to $300; adding coverage for medical expenses and loss of wages; offering insurance agents incentives to sell the policies; increasing television and radio advertising and working with community groups to promote the program; and making it easier for undocumented immigrants to get a California driver’s license.
But such modifications would require a change in how the program is funded, said Low, such as spreading more of the cost among the state’s motorists. Although he added that imposing fees on other drivers won’t happen any time soon.
