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Low-Cost Car Insurance Expands: State-Sponsored Program Adds 3 Lode Counties

Oct 2, 2007

By Joe Goldeen, The Record, Stockton, Calif.

Oct. 3--California's Low Cost Automobile Insurance Program just about doubled the number of counties this week where eligible uninsured motorists can get the minimum legal coverage for less than $400 a year.

Amador, Calaveras and Tuolumne counties are among the 20 counties added to the list, bringing the total to 42. San Joaquin County motorists have been able to purchase the low-cost insurance for $292 annually since June 2006.

Only 16 mostly small, rural counties, including Alpine, do not have the program, and state Insurance Commissioner Steve Poizner anticipates the insurance will be extended to them in the next several months.

"Hopefully, it will be an option statewide by the end of the year," Department of Insurance spokesman Jason Kimbrough said. "Expanding affordable options among all lines of insurance is a priority for Commissioner Poizner. So this expansion is a great step.

"This is real insurance underwritten by legitimate, licensed insurance companies. And as the program grows statewide and becomes better known, we'll see the number of uninsured motorists decrease at a greater rate," Kimbrough said.

Insurers are required to notify the state Department of Motor Vehicles when a driver has a lapse in auto insurance coverage. The DMV is then required to notify the motorist about possible vehicle registration suspension if there is no proof of insurance provided within 30 to 45 days, depending on the circumstances.

From Nov. 15 through July 31, the DMV mailed 54,921 "intent to suspend" letters to San Joaquin County motorists. There were 576,081 registered vehicles in the county as of Dec. 31.

The state created the low-cost plan as a pilot program in 1999, starting with vehicle owners in Los Angeles and San Francisco counties. It was a way to provide low-income, good drivers with affordable liability insurance offered through California-certified insurance companies.

Today, there are nearly 35,000 policies in force, and Kimbrough said 80 percent of those represent people who did not have auto insurance previously. Ninety-eight policies have been written in San Joaquin County as of July 31, he said.

Statewide, there are 3.4 million uninsured motorists who continue to place a burden on the insured-motorist population.

"One of the greatest misconceptions is that people think the low-cost automobile insurance program is a subsidy. That's not the case at all," Kimbrough said.

"The insurance industry helps fund the California Automobile Assigned Risk Plan (which administers the program) and the premium does cover the anticipated costs," he said.

Doug Heller, executive director of the Santa Monica-based Foundation for Consumer and Taxpayer Rights, which has advocated for the low-cost program since before its inception, took note of the small number of policyholders compared with the large number of uninsured.

"The problem with the program is not the program. It's the awareness factor. Those 98 people in Stockton, they are better off for it, and anyone they're driving near is better off for it. But they probably had to work to figure out how to get insured," Heller said.

First they have to hear about the program, then they have to make a phone call and get a list of insurance agents authorized by the state to sell the insurance. Then they have to find an agent on the list willing to sell the insurance, Heller said.

"Insurance agents don't make a lot of money on this product, so they're not real interested in pushing it," he said.

But the program has value to agents as a way to introduce a segment of low-income consumers to the insurance market, and the coverage has value despite the low numbers, Heller said.

"One person insured is better than none, because there is no cost to consumers or taxpayers. Let's recognize that any accident caused by one of those 98 people in Stockton is an accident that otherwise would be paid for out of the uninsured-motorist premiums that people pay," he said.

Contact reporter Joe Goldeen at (209) 546-8278 or [email protected]


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