Consumer Watchdog Watches Out for California Low-Income Auto Insurance

A proposed overall 3.8% rate hike on drivers insured under California’s Low Cost Auto Insurance Program has been withdrawn after Consumer Watchdog submitted comments urging the proposal be rejected or deferred. Instead, premium refunds will be issued for the months of March-July 2020 to reflect reduced driving and accidents while Californians have been sheltering in place during the COVID-19 pandemic.

In June 10 comments Consumer Watchdog asked the Insurance Commissioner to block proposed hikes in the price of auto insurance sold to low income motorists in Los Angeles and four of California’s largest counties. The data used to calculate the proposed rates dated back to before the coronavirus pandemic, and thus did not reflect reduced driving as a result of California’s stay-at-home order and the consequent severe economic impact, including widespread job losses.

The California Automobile Assigned Risk Plan (CAARP) had proposed increases averaging 3.8% statewide for the state’s Low Cost Auto Insurance Program, which enables low income motorists to purchase a lower cost liability auto insurance policy with more limited coverage. Larger proposed rate hikes would have averaged 4.3% for motorists in Los Angeles and Orange counties and 7.3% in Ventura, San Bernardino, Riverside and San Diego, among other counties. Blocking these hikes resulted in a collective savings of $259,000 in annual premiums for approximately 11,470 Low Cost Auto insured vehicles in these counties.

“We are pleased with CAARP’s decision to drop its rate hike proposal at a time when low income Californians are bearing the brunt of the economic impacts of the pandemic,” said Pamela Pressley, Consumer Watchdog’s Senior Staff Attorney. “Californians with limited incomes must not be forced to choose between family necessities and auto insurance that they are required to purchase under California law. Most other standard auto insurers have similarly withdrawn rate hike proposals based on outdated loss projections that were filed in the early part of the year before the stay at home orders were issued leading to reduced driving and in turn reduced insurance claims.”

CAARP has committed to providing 30% premium refunds to Low Cost Auto Insurance Program policyholders for March through May of 2020, and 15% premium refunds for June and July 2020, in response to bulletins issued by the Insurance Commissioner directing all auto insurance companies to provide refunds reflecting reduced driving and claims during the pandemic. Consumer Watchdog has asked the Commissioner to make public information on how those refunds will be calculated.

California’s Low Cost Auto Insurance program helps low income good drivers afford auto insurance that meets the state’s financial responsibility laws. Each policy provides liability coverage for the vehicle’s primary driver and eligible secondary drivers. Each individual car owner may buy separate policies to insure up to two vehicles, per person under this program.

To be eligible for the Low Cost Auto program, a driver must meet the following criteria:

  • Have a Valid California Driver’s License
  • Meet Income Eligibility Guidelines
  • Own a Vehicle Valued at $25,000 or Less
  • Be at Least 16 Years of Age
  • Have a Good Driving Record

Drivers can apply for Low Cost Auto Insurance program coverage here: https://www.mylowcostauto.com/

Rates for the Low Cost Auto Insurance Program

Rates for the Low Cost Auto Insurance Program, like all auto insurance rates, must be reviewed and approved by the Insurance Commissioner before they are implemented. In April, Consumer Watchdog urged the Commissioner not to approve any auto insurance rate increases until more recent data reflecting reduced driving becomes available. While most auto insurers have withdrawn pending rate hike requests in recent months, CSAA of Northern California is insisting on pursuing a 6.9% rate hike based on pre-pandemic data through 2019.

California’s voter-approved Proposition 103 requires insurance companies to open their books and publicly justify auto, home and business insurance rate increases before they take effect. Consumer Watchdog has used Proposition 103’s authority to block an estimated $3.4 billion in unjustified rate increases since 2003.

Consumer Watchdog sponsored the legislation that initiated the Low Cost Auto Insurance Program enacted by the California legislature in 1999.

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