California Lifeline Automobile Insurance Plan

Under California's experimental Lifeline Automobile Insurance Plan low-income “good drivers” in Los Angeles County and the city and county of San Francisco may buy a low-cost automobile insurance policy with reduced liability limits that satisfies the state's financial responsibility law. The plan operates in conjunction with California's Automobile Assigned Risk Plan.

1. Be California residents and live in a household with gross income no greater than 150% of the federal poverty level (about $20,000 for a family of three).

2. Be at least 19 years old and continuously licensed to drive for the previous three years.

3. Have no more than one at-fault property damage-only accident or one moving traffic violation, but not both, within the previous three years.

4. Have no record of an at-fault accident involving bodily injury or death or a felony or misdemeanor conviction for a Motor Vehicle Code violation.

College students claimed as dependents for federal or state income tax purposes are not eligible.

Eligibility must be recertified by the assigned risk plan after the first year and annually thereafter by the insurer that issued the policy.

The plan's policy offers reduced limits of liability. Under existing law, California drivers must buy a policy with at least the following minimum liability limits: for bodily injury to, or the death of one person $15,000, for bodily injury to, or the death to two or more people $30,000 and $5,000 for property damage (15/30/5).

The low-cost policy provides $10,000 for bodily injury to, or the death of one person, $20,000 for bodily injury to, or death of two or more people, and $3,000 for property damage (10/20/3).

The policy provides coverage for automobiles with a value of $12,000 or less at the time of purchase.

The policy covers the named insured and any other person using the automobile with the named insured's permission. It does not cover members of the named insured's household who are (1) younger than 19 years old; (2) have not been continuously licensed for the previous three years; and (3) have two or more at-fault property damage accidents, two or more points for moving traffic violations, one or more at-fault accidents involving bodily injury or death within the previous three years, or a felony or misdemeanor conviction for violation the of Motor Vehicle Code.

Grounds for Cancellation. Policies have an initial one-year term and are renewable on an annual basis, but may be canceled for the following reasons:

1. nonpayment of premium,

2. fraud or material misrepresentation affecting the policy or the insured,

3. the insured buys liability insurance in addition to the coverage provided under a low-cost policy, (This prohibition does not apply to uninsured motorist or collision coverage purchased outside of the plan.), and

4. the insured buys or maintains an automobile liability insurance policy other than a low-cost plan policy for an additional vehicle in his household.

Grounds for Nonrenewal. Policies may be nonrenewed only because there has been a substantial increase in the hazard insured against or the insured no longer meets the program's eligibility requirements.

The initial annual premium for Los Angeles County is $450 and for the city and county of San Francisco, $410. A 25% surcharge is added if the named insured is an unmarried male between 19 and 24 years old or if an unmarried male between 19 and 24 lives in the household of the named insured and drives the vehicle covered by the low-cost policy.

1. Rates must be sufficient to cover (a) losses incurred under the policy and (b) expenses such as administration, underwriting, taxes, commissions, and claims adjustment expenses. “Losses incurred,” means, claims paid, claims incurred and reported, and claims incurred but not yet reported.

2. Rates must be set so that policyholders who are not participating in this or any other pilot program pay no subsidy.

3. Beginning January 1, 2001, and annually thereafter, the assigned risk plan must submit loss and expense data, along with proposed new premiums to the insurance commissioner for approval. The commissioner must act on the premium recommendation within 90 days.

Application for coverage is made through insurance producers certified by the assigned risk plan. To demonstrate financial eligibility, applicants must present a copy of their federal or state income tax return for the previous year or other reliable evidence from a government agency of their gross annual household income. They must certify that the representation made as proof of financial eligibility are true, correct, and contain no material misrepresentations or omissions of fact to the best of their knowledge and belief.

The producer forwards the application, supporting documents, and the applicant's certification to the assigned risk plan. Producers receive the same commission for low-cost policy business as they receive for assigned risk business. No other fees may be charged or collected, and the sale of a low-cost policy may not be conditioned on the purchase of another product or service.

The insurance commissioner, after a public hearing, must either approve or develop a plan to equitably apportion among assigned risk plan insurers people eligible to buy a low-cost automobile insurance policy. And, after consultation with the assigned risk plan, he must also adopt implementing regulations within 60 days after January 1, 2000.

Beginning January 1, 2001, the assigned risk plan must annually report on the status of the pilot program to the legislature.

The pilot program was authorized to begin operation January 1, 2000. It must be fully operational by July 1, 2000. And, unless extended, the program expires January 1, 2004.

The California Senate Appropriations Committee said that the legislation would cost $250,000 in 1999-2000, and ongoing cost of $500,000 annually thereafter.

● In 1998, the Department of Insurance reported that about 22% of all California drivers were uninsured. This represents several million drivers. The estimate was down from 28% in 1996.

● Parts of South Central and East L.A. have pockets where up to 60% of motorists are uninsured.

● Demographically, California's uninsured are more likely to be home renters; have an income of less than $20,000; be between 18 and 24 years of age; have a high school education or less; and be male, Hispanic, or black.

● In Los Angeles, premiums cost for minimum liability coverage (15/30/5) ranges from a low of $660 to a high of $1,796.


February 3, 2000		2000-R-0163
CALIFORNIA LIFELINE AUTOMOBILE INSURANCE PLAN

By: Jerome Harleston, Senior Attorney