Legislation that would expand California’s pilot, low-cost auto insurance program is premature without first conducting a thorough evaluation of its effectiveness, according to Sam Sorich, president of the Association of California Insurance Companies (ACIC).
“This five-year-old pilot program has not been fully evaluated to determine if it has significantly reduced – as intended — the number of uninsured drivers or would be beneficial to consumers in other counties,” said Sorich.
California’s low-cost auto insurance program is now available in two counties, Los Angeles and San Francisco. The program is scheduled to end – or sunset — January 2007, unless extended before then by the Legislature and governor.
Pending legislation, SB 20 by Sen. Martha Escutia (D-Whittier), would expand the program statewide and extend the sunset to January 2011.
“There are a number of issues that should be examined before any action is taken to change the program’s sunset or scope,” said Sorich.
For instance, he noted that the program was intended to address the issue of drivers who are uninsured because of economic hardships. However, about 7 percent of the drivers who have purchased low-cost program policies had insurance when they applied and another 16 percent had coverage sometime in the past.
“Apparently, some drivers who otherwise would purchase insurance in the voluntary market are ‘buying down’ to the low-cost program’s policy. This runs counter to the program’s goal of directing its efforts to the uninsured and is one of the issues that should be evaluated before the sunset or the scope of the program is changed,” said Sorich.
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