Making Insurance Less of a Financial Roadblock
Think auto insurance rates are outrageous?
Consider this: In Los Angeles County, 1.4 million cars are uninsured, their drivers unable or unwilling to cough up the thousands of dollars that even basic liability coverage can cost.
In other words, if you get whacked by another vehicle, there’s a one-in-four chance that the driver isn’t insured.
You can bet that rates are higher in part to deal with this problem. Not to mention that those who do have insurance also have to buy uninsured-motorist protection in case the other driver isn’t covered.
On the other side, a motorist without coverage risks losing his driver’s license, paying a fine of up to $500 and having his vehicle impounded.
All around, a bad deal for everybody. But how to get more people insured?
“Large portions of our population in L.A. are just barely getting by,” said Byron Tucker, spokesman for the California Department of Insurance. “If you earn minimum wage, food and rent are going to come before car insurance.”
A few years ago, the state negotiated with insurance companies to allow low-income drivers to buy basic liability coverage for $347 per year. That’s pretty cut-rate when you consider that a bare-bones policy for a single man in Compton can be as high as $3,762 per year, according to the Department of Insurance.
A pilot program was established in Los Angeles and San Francisco, with the idea that if it succeeded, lawmakers might consider expanding it elsewhere in the state.
Dimitri Kotsos, a 68-year-old disabled veteran living on a fixed income of $900 per month, signed up for the program last year. He had been driving without coverage after the cost to insure his 1991 Ford Crown Victoria hit $1,200 a year.
“I was without insurance probably close to a year, and it scared the hell out of me, quite frankly,” said Kotsos, who lives in North Hollywood. Now, he said, he pays $358 for liability insurance: $100 down and six payments of $43.
He was skeptical initially, fearing that the insurance would be provided by a fly-by-night firm. But the state, which does not subsidize the program, requires all insurance companies licensed in California to participate. Kotsos’ policy was underwritten by State Farm.
So far, only 6,000 people have taken advantage of the cheap policies. If more don’t sign up, state insurance officials will have no ammunition when they return to the Legislature in two years to ask that the program be expanded.
“The sale and distribution of the product has not worked at all,” said state Insurance Commissioner John Garamendi, who later this month will launch a campaign in Los Angeles advertising the low-cost insurance.
The problem, Garamendi said, is that most people aren’t aware of the program, which provides basic liability insurance and offers, for additional fees, minimal medical and uninsured-motorist coverage.
Moreover, he said, insurance agents don’t like to push the policies -- or jump through the bureaucratic hoops necessary to prove that an applicant is qualified -- because they make only $37 for every policy they sell. Sales can be even more difficult when applicants are unable to sign up online.
“For 37 bucks, they’re not going to go knocking on doors,” Garamendi said. “So we’re going to bring these people to the agents.”
To entice drivers into the program, Garamendi will work through churches and community organizations that serve low-income people. The state will distribute applications to drivers and insurance agents, he said. Those interested can also call a toll-free number, (800) 622-0954, for help in signing up.
To qualify, a motorist must be at least 19 years old with a good driving record and may not be living at home or claimed as a dependent on his parents’ income tax.
Income must be below $23,275 annually for a single person, or $47,125 for a family of four. Income can be verified in a variety of ways; Kotsos used his Medi-Cal card.
The policy is not rich: Drivers are insured for just $10,000 worth of damage for each person in an accident, and a total of $20,000 per accident. It does not include coverage to fix the driver’s own car -- just insurance to cover the damage to other vehicles and other people.
That is less than the minimum typically required by state law, which mandates coverage of $15,000 per person and $30,000 per accident. But to make the inexpensive policies pencil out financially for insurance companies, the Legislature allowed the smaller policies.
The policies are minimal, but they do allow drivers who cannot afford retail insurance policies to drive legally.
“It’s nice to be able to get on the road and not have to worry that something is going to happen,” Kotsos said.
“They can pull you over and ask if you have insurance,” he said. “If I didn’t have it, it’s goodbye license and goodbye car. And then what are you going to do?”