Low Cost Auto Insurance
14 January 1999
Low Cost Auto Insurance; Statement by Barry Carmody President Association of California Insurance Companies
SACRAMENTO, Calif.--Jan. 13, 1999--Note: Statement by Barry Carmody President Association of California Insurance Companies
Attempts to lower the cost of auto insurance and to reduce the uninsured motorist population in California are worthwhile goals. Insurers in fact, have always been part of such efforts, and that is why California drivers are now enjoying a 10-year low in auto rates.
However, the latest proposal (SB 171) is an attempt to impose subsidies on all drivers as a method of financing a low-cost auto policy to certain designated individuals. Insurers have opposed subsidies because we believe no one should have to pay more than the potential risk they represent for loss. That's why good drivers should enjoy low rates and bad drivers should pay more.
When we move to subsidies, we abandon that concept and create disparity between good drivers predicated on their economic position. SB 171 creates two subsidies, one in the initial pricing of the product and the second on the claims side when these motorists are involved in accidents and the claims exceed the financial limits of the low-cost policies.
It is unfortunate that SB 171 ignores the number one cost driving auto insurance rates -- litigation. It is estimated that Proposition 213, an insurance industry supported initiative, has saved motorists in California more than $1 billion in reduced premiums by helping to eliminate unjustified litigation. Unlike Proposition 213, SB 171 in its current form imposes a costly social mandate on all California drivers and will erode the fairness of the current system. SB 171 should be amended to focus on reducing the costs in the system, and we will raise these issues as the bill is considered by the Legislature.
