Existing law establishes, within the California Automobile Assigned Risk Plan, a low-cost automobile insurance program for all counties in California.

Existing law, until January 1, 2025, requires the California Automobile Assigned Risk Plan to report to the Insurance Commissioner on an annual basis on the status of the program and, on or before March 15 of each year, requires the commissioner to prepare and propose a plan in a report to the Legislature setting forth the commissioners methods to inform households eligible for the program about the availability of low-cost automobile insurance. Existing law, on or before March 15 of each year, requires the commissioner to submit a combined report to the Legislature.

This bill would, instead, require the commissioner to submit the combined report to the Legislature on or before March 15, 2024, and on or before March 15 every 5 years thereafter. The bill would, instead, require the commissioner to submit the annual report on the methods to inform households eligible for the program to the Legislature on or before March 15, 2024, March 15, 2025, and March 15, 2026, and every 5 years thereafter. The bill would require this annual report to be posted on specified internet websites beginning with the report due on or before March 15, 2024. The bill would remove the January 1, 2025, sunset date, thereby extending the operation of the California Automobile Assigned Risk Plan indefinitely, and would make conforming changes.

Existing law establishes, within the California Automobile Assigned Risk Plan, a low-cost automobile insurance program for all counties in California.

Existing law, until January 1, 2025, requires the California Automobile Assigned Risk Plan to report to the Insurance Commissioner on an annual basis on the status of the program and, on or before March 15 of each year, requires the commissioner to prepare and propose a plan in a report to the Legislature setting forth the commissioners methods to inform households eligible for the program about the availability of low-cost automobile insurance. Existing law, on or before March 15 of each year, requires the commissioner to submit a combined report to the Legislature.

This bill would, instead, require the commissioner to submit the combined report to the Legislature on or before March 15, 2024, and on or before March 15 every 5 years thereafter. The bill would, instead, require the commissioner to submit the annual report on the methods to inform households eligible for the program to the Legislature on or before March 15, 2024, March 15, 2025, and March 15, 2026, and every 5 years thereafter. The bill would require this annual report to be posted on specified internet websites beginning with the report due on or before March 15, 2024. The bill would remove the January 1, 2025, sunset date, thereby extending the operation of the California Automobile Assigned Risk Plan indefinitely, and would make conforming changes.

Existing law establishes, within the California Automobile Assigned Risk Plan, a low-cost automobile insurance program for all counties in California.

Existing law, until January 1, 2025, requires the California Automobile Assigned Risk Plan to report to the Insurance Commissioner on an annual basis on the status of the program and, on or before March 15 of each year, requires the commissioner to prepare and propose a plan in a report to the Legislature setting forth the commissioners methods to inform households eligible for the program about the availability of low-cost automobile insurance. Existing law, on or before March 15 of each year, requires the commissioner to submit a combined report to the Legislature.

This bill would, instead, require the commissioner to submit the combined report to the Legislature on or before March 15, 2024, and on or before March 15 every 5 years thereafter. The bill would, instead, require the commissioner to submit the annual report on the methods to inform households eligible for the program to the Legislature on or before March 15, 2024, March 15, 2025, and March 15, 2026, and every 5 years thereafter. The bill would require this annual report to be posted on specified internet websites beginning with the report due on or before March 15, 2024. The bill would remove the January 1, 2025, sunset date, thereby extending the operation of the California Automobile Assigned Risk Plan indefinitely, and would make conforming changes.

Existing law establishes, within the California Automobile Assigned Risk Plan, a low-cost automobile insurance program for all counties in California. Existing law provides a rebuttable presumption that a driver is qualified to purchase a low-cost automobile insurance policy if the person meets and claims to meet specified requirements.

Existing law establishes, within the California Automobile Assigned Risk Plan, a low-cost automobile insurance program for all counties in California. Existing law provides a rebuttable presumption that a driver is qualified to purchase a low-cost automobile insurance policy if the person meets and claims to meet specified requirements.

This bill would make technical, nonsubstantive changes to this provision.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 917

Author:(Ortega)

As Amended Ver:July 3, 2023

Majority vote

SUMMARY

Makes permanent the California Low-Cost Auto (CLCA) Insurance program.

1. Eliminates the January 1, 2025 sunset date.
2. Requires the California Department of Insurance (CDI) to submit a report to the Legislature on an annual basis, on or before March 15, 2024, March 15, 2025, and March 15, 2026, and every five years thereafter, beginning with the report due on or before March 15, 2031.

Senate Amendments

1. Requires the report to Legislature to be provided on an annual basis on or before March 15, 2024, March 15, 2025, and March 15, 2026, and every five years thereafter, beginning with the report due on or before March 15, 2031 instead of every five years after March 15, 2024.
2. Requires the report to be posted on CDIs and the California Automobile Assigned Risk Plan's internet websites, beginning with the report due on or before March 15, 2024.

COMMENTS

Every driver in California is required to have auto insurance. The CLCA program, which began in 2000, is a state-sponsored program that makes auto insurance affordable. It's designed to provide income-eligible drivers affordable rates to meet California's financial responsibility limits. At inception, CLCA began as a pilot program for the counties of Los Angeles and San Francisco. In 2006, CLCA expanded to all 58 counties. According to CDI, CLCA has provided auto insurance coverage to more than 196,589 drivers since the start. In the year 2022, there was a total of 9,981 new applications assigned, 13,984 canceled policies, 15,948 renewed policies, and 1,427 policies reinstated. At the end of 2022, there were 16,371 active policies. According to California Automotive Assigned Risk Plan (CAARP), approximately 77% of applications assigned were from uninsured motorists at the time of their CLCA policy application. Currently, there are about 20,000 policies enrolled in the CLCA program. To be eligible for the CLCA program, an individual must have a valid California driver's license, own a vehicle valued at $25,000 or less, be at least 16 years of age, have a good driving record, and meet income eligibility requirements.

Considering the CLCA program has been around for over 20 years and endured sunset extension after sunset extension, it seems reasonable to make this beneficial program permanent. According to CDI, the CLCA program has proven success by keeping rates sufficient to meet statutory rate-setting standards, serving underserved communities, and offering access to previously uninsured motorists, thus reducing the number of uninsured drivers.

According to the Author

CLCA is a program that improves the lives of low-income communities across the state by providing low-cost car insurance to low-income drivers. The CLCA allows people to keep the use of their cars, which is an essential resource for workers to travel to their jobs. The CLCA was created in 2000 as a pilot program and the program's sunset date has been extended every few years since then as it has proven to be an effective tool to provide affordable auto insurance to low-income drivers. To ensure that the CLCA program continues, AB 917 would eliminate the sunset date and make the program permanent

Arguments in Support

According to CDI, since its inception, the CLCA Program has proven to be a reliable resource for income-eligible individuals needing auto insurance. There continues to be a need for this program, making the sunset date unnecessary. This program helps prevent drivers from driving uninsured in our state, especially during times of financial strain. To ensure that this effective program continues to provide needed auto insurance to income-eligible drivers, AB 917 would remove the sunset date and make this program permanent.

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Assembly Appropriations Committee, absorbable costs to CDI to continue the low-cost automobile insurance program indefinitely (Insurance Fund). CDI notes that existing law requires insurers doing business in California to pay an annual special purpose assessment and CDI may use up to $0.05 of assessment revenues to notify insurers and other members of the public about the program's existence. Additionally, rates for program policies must be sufficient to cover losses incurred and expenses, including the costs of administration, underwriting, taxes, commissions, and claims adjusting.

VOTES:

ASM INSURANCE: 14-0-0

YES: Calderon, Essayli, Berman, Cervantes, Chen, Vince Fong, Gipson, Grayson, Jones‑Sawyer, Ortega, Rodriguez, Soria, Valencia, Wood

ASM APPROPRIATIONS: 15-0-1

YES: Holden, Megan Dahle, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Addis, Lowenthal, Papan, Pellerin, Robert Rivas, Sanchez, Weber, Wilson

ABS, ABST OR NV: Mathis

ASSEMBLY FLOOR: 77-0-3

YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones‑Sawyer, Kalra, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

ABS, ABST OR NV: Chen, Lackey, Quirk-Silva

SENATE FLOOR: 40-0-0

YES: Allen, Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

UPDATED

VERSION: July 3, 2023

CONSULTANT: Kathleen O'Malley / INS. / (916) 319-2086 FN: 0001875

 THIRD READING  

Bill No: AB 917

Author: Ortega (D), et al.

Amended: 7/3/23 in Senate

Vote: 21

SENATE INSURANCE COMMITTEE: 7-0, 6/28/23

AYES: Rubio, Nguyen, Ashby, Jones, McGuire, Niello, Portantino

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 77-0, 5/22/23 - See last page for vote

SUBJECT: Low-cost automobile insurance program

SOURCE: Author

DIGEST:

This bill makes the California Automobile Assigned Risk Plan (CAARP) permanent by eliminating the sunset date; and changes the requirement that the Insurance Commissioner (IC) submit a report to the legislature on CAARP and the Low Cost Automobile Insurance Program (Low Cost Auto) from annually to every five years, beginning March 15, 2026.

ANALYSIS:

Existing law:

1. Establishes the CAARP for the purposes of providing automobile bodily injury and property damage liability insurance to applicants who in good faith are entitled to but are unable to procure that insurance through ordinary methods.
   1. Requires that the cost of the plan, including any personnel and contracting costs, be fairly apportioned among the subscribing insurers;
   2. Requires the plan to address standards for determining eligibility; apportion eligible applicants among insurers; provide for rules for administering and operating the plan; and explain the basis for premium charges; and describe other procedures; and
   3. Requires that rates shall not be excessive, inadequate, nor unfairly discriminatory, and shall be actuarially sound so as to result in no subsidy of the plan.
2. Establishes the Low Cost Auto Program within CAARP to provide low-cost auto liability policies, as specified.
3. Requires the CAARP Plan to report specified information to the IC annually, and requires the IC to report to the legislature specified information regarding the CAARP and the Low Cost Auto program on an annual basis by March 15.
4. Repeals the CAARP on January 1, 2025, unless extended.

This bill:

1. Requires the IC to submit a report to the legislature on the CAARP and Low Cost Auto programs on or before March 15, 2026 and every five years thereafter.
2. Requires CDI to post the CAARP annual advisory panel report on its website.
3. Deletes, permanently, the sunset on the programs.

Background

The CAARP was originally created in 1947 to provide insurance to those who could not otherwise acquire it due to a poor driving record. CAARP assigns applicants for coverage randomly to auto insurers based on each insurer's portion of the voluntary market. Over time, CAARP has become the primary source of low-cost insurance. Although it started as a pilot program in 2000, it is now a statewide program, and the sunset has been extended four times.

Every driver in California is required to have auto insurance. The Low Cost Auto program helps make auto insurance affordable by providing income-eligible drivers affordable rates to meet California's financial responsibility limits. At inception, Low Cost Auto began as a pilot program for the counties of Los Angeles and San Francisco. In 2006, the program expanded to all 58 counties. According to the California Department of Insurance (CDI), Low Cost Auto has provided auto insurance coverage to more than 196,589 drivers since the start. In the year 2022, there was a total of 9,981 new applications assigned, 13,984 canceled policies, 15,948 renewed policies, and 1,427 policies reinstated. At the end of 2022, there were 16,371 active policies. According to CAARP, approximately 77% of applications assigned were from uninsured motorists at the time of their policy application. Currently, there are about 20,000 policies enrolled in the Low Cost Auto program. To be eligible for the program, an individual must have a valid California driver's license, own a vehicle valued at $25,000 or less, be at least 16 years of age, have a good driving record, and meet income eligibility requirements.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 8/15/23)

California Department of Insurance

Consumer Federation of California

Strategic Actions for a Just Economy

OPPOSITION: (Verified 8/15/23)

None received

ARGUMENTS IN SUPPORT: According to CDI, since its inception, the low-cost auto program has proven to be a reliable resource for income-eligible individuals needing auto insurance. There continues to be a need for this program, making the sunset date unnecessary. This program helps prevent drivers from driving uninsured in our state, especially during times of financial strain. To ensure that this effective program continues to provide needed auto insurance to income-eligible drivers, AB 917 removes the sunset date and makes this program permanent.

According to the author, California’s Low Cost Auto Program is a program that improves the lives of low-income communities across the state by providing low-cost car insurance to low-income drivers. The program allows people to keep the use of their cars, which is an essential resource for workers to travel to their jobs. The Low Cost Auto program was created in 2000 as a pilot program and the program’s sunset date has been extended every few years since, as it has proven to be an effective tool to provide affordable auto insurance to low-income drivers. To ensure that the program continues

ASSEMBLY FLOOR: 77-0, 5/22/23

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

NO VOTE RECORDED: Chen, Lackey, Quirk-Silva

Prepared by: Erin Ryan / INS. / (916) 651-4110

8/16/23 10:24:57

**** END ****

SENATE COMMITTEE ON INSURANCE

Senator Susan Rubio, Chair

2023 - 2024 Regular

Bill No: AB 917 Hearing Date: June 28, 2023

SUBJECT: Low-cost automobile insurance program

DIGEST:

Would make the California Automobile Assigned Risk Plan (CAARP) permanent by eliminating the sunset date; and would change the requirement that the Insurance Commissioner (IC) submit a report to the legislature on CAARP and the Low Cost Automobile Insurance Program (Low Cost Auto) from annually to every five years, beginning March 15, 2024.

ANALYSIS:

Existing law:

1. Establishes the CAARP for the purposes of providing automobile bodily injury and property damage liability insurance to applicants who in good faith are entitled to but are unable to procure that insurance through ordinary methods.
   1. Requires that the cost of the plan, including any personnel and contracting costs, be fairly apportioned among the subscribing insurers;
   2. Requires the plan to address standards for determining eligibility; apportion eligible applicants among insurers; provide for rules for administering and operating the plan; and explain the basis for premium charges; and describe other procedures; and
   3. Requires that rates shall not be excessive, inadequate, nor unfairly discriminatory, and shall be actuarially sound so as to result in no subsidy of the plan.
2. Establishes the Low Cost Auto Program within CAARP to provide low-cost auto liability policies, as specified.
3. Requires the CAARP Plan to report specified information to the IC annually, and requires the IC to report to the legislature specified information regarding the CAARP and the Low Cost Auto program on an annual basis by March 15.
4. Repeals the CAARP on January 1, 2025, unless extended.

This bill:

1. Would require the IC to submit a report to the legislature on the CAARP and Low Cost Auto programs on or before March 15, 2024 and every five years thereafter.
2. Would permanently delete the sunset on the programs.

Background

The CAARP was originally created in 1947 to provide insurance to those who could not otherwise acquire it due to a poor driving record. CAARP assigns applicants for coverage randomly to auto insurers based on each insurer's portion of the voluntary market. Over time, CAARP has become the primary source of low-cost insurance. Although it started as a pilot program in 2000, it is now a statewide program, and the sunset has been extended four times.

Every driver in California is required to have auto insurance. The Low Cost Auto program helps make auto insurance affordable by providing income-eligible drivers affordable rates to meet California's financial responsibility limits. At inception, Low Cost Auto began as a pilot program for the counties of Los Angeles and San Francisco. In 2006, the program expanded to all 58 counties. According to the California Department of Insurance (CDI), Low Cost Auto has provided auto insurance coverage to more than 196,589 drivers since the start. In the year 2022, there was a total of 9,981 new applications assigned, 13,984 canceled policies, 15,948 renewed policies, and 1,427 policies reinstated. At the end of 2022, there were 16,371 active policies. According to CAARP, approximately 77% of applications assigned were from uninsured motorists at the time of their policy application. Currently, there are about 20,000 policies enrolled in the Low Cost Auto program. To be eligible for the program, an individual must have a valid California driver's license, own a vehicle valued at $25,000 or less, be at least 16 years of age, have a good driving record, and meet income eligibility requirements.

Questions

SB 1107 (Dodd, Chap. 717, Statutes of 2022) beginning January 1, 2025 increases the amount of liability insurance coverage an owner or operator of a motor vehicle is required to maintain to $30,000 for bodily injury or death of one person, $60,000 for bodily injury or death of all persons, and $15,000 for damage to the property of others as a result of any one accident. Those limits will increase to $50,000/$100,000/$25,000 effective Jan 1, 2035. This is the first increase in these limits since 1967. The current minimum limits are $15,000, $30,000, and $5,000 respectively. These may impact the low-cost auto program, both in terms of cost of policies and the number of consumers turning to the program. An advisory committee convened by the CDI to review the program and make recommendations supported eliminating the sunset, but also recommended keeping financial responsibility requirements at current levels for low-cost auto policies. Should the CDI continue to report annually to the legislature at least until the new requirements have a chance to take effect? In addition, should the CDI post it’s the CAARP advisory panel annual review of the program on its website?

Suggested Amendments

On page 2, lines 8-12, amend to specify that the report to the legislature will be every five years beginning with the report on March 15, 2026.

ADD a requirement that CDI post the CAARP annual advisory panel report on its website.

ADD Senator Rubio as a coauthor.

Related/Prior Legislation

SB 1107 (Dodd, Chap. 717, Statutes of 2022) increased financial responsibility limits for all automobile policies in California beginning January 1, 2025

SB 570 (Rubio, Chap. 275, Statutes of 2019) extended the sunset on the low cost auto program to January 1, 2025

ARGUMENTS IN SUPPORT:

According to CDI, since its inception, the low-cost auto program has proven to be a reliable resource for income-eligible individuals needing auto insurance. There continues to be a need for this program, making the sunset date unnecessary. This program helps prevent drivers from driving uninsured in our state, especially during times of financial strain. To ensure that this effective program continues to provide needed auto insurance to income-eligible drivers, AB 917 would remove the sunset date and make this program permanent.

According to the author, California’s Low Cost Auto Program is a program that improves the lives of low-income communities across the state by providing low-cost car insurance to low-income drivers. The program allows people to keep the use of their cars, which is an essential resource for workers to travel to their jobs. The Low Cost Auto program was created in 2000 as a pilot program and the program’s sunset date has been extended every few years since, as it has proven to be an effective tool to provide affordable auto insurance to low-income drivers. To ensure that the program continues, AB 917 would eliminate the sunset date and make the program permanent.

ARGUMENTS IN OPPOSITION:

None received

SUPPORT:

California Department of Insurance

Consumer Federation of California

OPPOSITION:

None received

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 917

Author:(Ortega)

As Amended Ver:March 16, 2023

Majority vote

SUMMARY

Makes permanent the California Low-Cost Auto (CLCA) Insurance program.

Major Provisions

1. Eliminates the January 1, 2025 sunset date.
2. Requires the California Department of Insurance (CDI) to submit a report to the Legislature on or before March 15, 2024 and on or before March 15 every five years thereafter.
3. Makes other technical and non-substantive changes.

COMMENTS

Every driver in California is required to have auto insurance. The CLCA program, which began in 2000, is a state-sponsored program that makes auto insurance affordable. It's designed to provide income-eligible drivers affordable rates to meet California's financial responsibility limits. At inception, CLCA began as a pilot program for the counties of Los Angeles and San Francisco. In 2006, CLCA expanded to all 58 counties. According to CDI, CLCA has provided auto insurance coverage to more than 196,589 drivers since the start. In the year 2022, there was a total of 9,981 new applications assigned, 13,984 canceled policies, 15,948 renewed policies, and 1,427 policies reinstated. At the end of 2022, there were 16,371 active policies. According to California Automotive Assigned Risk Plan (CAARP), approximately 77% of applications assigned were from uninsured motorists at the time of their CLCA policy application. Currently, there are about 20,000 policies enrolled in the CLCA program. To be eligible for the CLCA program, an individual must have a valid California driver's license, own a vehicle valued at $25,000 or less, be at least 16 years of age, have a good driving record, and meet income eligibility requirements.

Considering the CLCA program has been around for over 20 years and endured sunset extension after sunset extension, it seems reasonable to make this beneficial program permanent. According to CDI, the CLCA program has proven success by keeping rates sufficient to meet statutory rate-setting standards, serving underserved communities, and offering access to previously uninsured motorists, thus reducing the number of uninsured drivers.

According to the Author

CLCA is a program that improves the lives of low-income communities across the state by providing low-cost car insurance to low-income drivers. The CLCA allows people to keep the use of their cars, which is an essential resource for workers to travel to their jobs. The CLCA was created in 2000 as a pilot program and the program's sunset date has been extended every few years since then as it has proven to be an effective tool to provide affordable auto insurance to low-income drivers. To ensure that the CLCA program continues, this bill would eliminate the sunset date and make the program permanent

Arguments in Support

According to CDI, since its inception, the CLCA Program has proven to be a reliable resource for income-eligible individuals needing auto insurance. There continues to be a need for this program, making the sunset date unnecessary. This program helps prevent drivers from driving uninsured in our state, especially during times of financial strain. To ensure that this effective program continues to provide needed auto insurance to income-eligible drivers, AB 917 would remove the sunset date and make this program permanent.

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Assembly Appropriations Committee, absorbable costs to the CDI to continue the low-cost automobile insurance program indefinitely (Insurance Fund). CDI notes that existing law requires insurers doing business in California to pay an annual special purpose assessment and CDI may use up to $0.05 of assessment revenues to notify insurers and other members of the public about the program's existence. Additionally, rates for program policies must be sufficient to cover losses incurred and expenses, including the costs of administration, underwriting, taxes, commissions, and claims adjusting.

VOTES

ASM INSURANCE: 14-0-0

YES: Calderon, Essayli, Berman, Cervantes, Chen, Vince Fong, Gipson, Grayson, Jones‑Sawyer, Ortega, Rodriguez, Soria, Valencia, Wood

ASM APPROPRIATIONS: 15-0-1

YES: Holden, Megan Dahle, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Addis, Lowenthal, Papan, Pellerin, Robert Rivas, Sanchez, Weber, Wilson

ABS, ABST OR NV: Mathis

UPDATED

VERSION: March 16, 2023

CONSULTANT: Kathleen O'Malley / INS. / (916) 319-2086 FN: 0000344

Date of Hearing: May 10, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 917

Author:(Ortega) – As Amended Ver:March 16, 2023

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill removes the January 1, 2025, sunset date for the California Low-Cost Auto (CLCA) insurance program within the California Automobile Assigned Risk Plan and requires the Insurance Commissioner to submit the program report to the Legislature every five years, instead of annually.

FISCAL EFFECT:

Absorbable costs to the California Department of Insurance (CDI) to continue the low-cost automobile insurance program indefinitely (Insurance Fund). CDI notes that existing law requires insurers doing business in California to pay an annual special purpose assessment and CDI may use up to $0.05 of assessment revenues to notify insurers and other members of the public about the program’s existence. Additionally, rates for program policies must be sufficient to cover losses incurred and expenses, including the costs of administration, underwriting, taxes, commissions, and claims adjusting.

COMMENTS:

1. Purpose. According to the author, the CLCA insurance program “was created in 2000 as a pilot program and the program’s sunset date has been extended every few years since then as it has proven to be an effective tool to provide affordable auto insurance to low-income drivers.”  The author proposes to eliminate the sunset date to ensure the program continues.
2. CLCA. Existing law requires every driver in California to have auto insurance.  The state-sponsored CLCA program began in 2000 as a pilot program in the counties of Los Angeles and San Francisco to provide income-eligible drivers affordable auto insurance rates.  CLCA expanded to cover all 58 counties in 2006.  According to the CDI, CLCA has provided coverage to more than 196,500 drivers since the program’s inception, with the majority of drivers uninsured at the time of their application.  To be eligible for CLCA, an individual must have a valid California driver’s license, own a vehicle valued at $25,000 or less, be at least 16 years old, have a good driving record, and meet specified income thresholds.  There are currently approximately 20,000 active policies under the program.

Prior legislation to extend CLCA’s sunset date also contained programmatic changes.  Most recently, for example, SB 570 (Rubio), Chapter 274, Statutes of 2019, which extended the sunset date to January 1, 2025, also eliminated a gender surcharge, expanded program access to students, and eased income eligibility reporting requirements. This bill does not make any program changes, but repeals the program’s sunset date and shifts the program’s annual report requirement to instead be due every five years.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: April 26, 2023

ASSEMBLY COMMITTEE ON INSURANCE

Lisa Calderon, Chair

ABPCA Bill Id:AB 917 (

Author:Ortega) – As Amended Ver:March 16, 2023

SUBJECT: Low-cost automobile insurance program

SUMMARY: Makes permanent the California Low-Cost Auto (CLCA) Insurance program. Specifically, this bill:

1. Eliminates the January 1, 2025 sunset date.
2. Requires the California Department of Insurance (CDI) to submit a report to the Legislature on or before March 15, 2024 and on or before March 15 every 5 years thereafter.
3. Makes other technical and non-substantive changes.

EXISTING LAW:

1. Requires CDI to submit a report on CLCA to the Legislature on or before March 15 each year. (Insurance (Ins.) Code, Section 11629.81)
2. Establishes the CLCA within the California Automobile Assigned Risk Plan (CAARP) until January 1, 2025, a low-cost automobile insurance program for all counties in California. (Ins. Code, Section 11629.7)
3. Provides liability coverage from any one accident in amounts of $10,000 for bodily injury or death per person, up to $20,000 for bodily injury or death per accident, and $3,000 for property damage per accident. (Ins. Code, Section 11629.71)

FISCAL EFFECT: Unknown

COMMENTS:

Purpose: According to the author, “CLCA is a program that improves the lives of low-income communities across the state by providing low-cost car insurance to low-income drivers. The CLCA allows people to keep the use of their cars, which is an essential resource for workers to travel to their jobs. The CLCA was created in 2000 as a pilot program and the program’s sunset date has been extended every few years since then as it has proven to be an effective tool to provide affordable auto insurance to low-income drivers. To ensure that the CLCA program continues, AB 917 would eliminate the sunset date and make the program permanent.”

Background: Every driver in California is required to have auto insurance. The CLCA program, which began in 2000, is a state-sponsored program that makes auto insurance affordable. It’s designed to provide income-eligible drivers affordable rates to meet California’s financial responsibility limits. At inception, CLCA began as a pilot program for the counties of Los Angeles and San Francisco. In 2006, CLCA expanded to all 58 counties. According to CDI, CLCA has provided auto insurance coverage to more than 196,589 drivers since the start. In the year 2022, there was a total of 9,981 new applications assigned, 13,984 canceled policies, 15,948 renewed policies, and 1,427 policies reinstated. At the end of 2022, there were 16,371 active policies. According to CAARP, approximately 77% of applications assigned were from uninsured motorists at the time of their CLCA policy application. Currently, there are about 20,000 policies enrolled in the CLCA program. To be eligible for the CLCA program, an individual must have a valid California driver’s license, own a vehicle valued at $25,000 or less, be at least 16 years of age, have a good driving record, and meet income eligibility requirements.

Considering the CLCA program has been around for over 20 years and endured sunset extension after sunset extension, it seems reasonable to make this beneficial program permanent. According to CDI, the CLCA program has proven success by keeping rates sufficient to meet statutory rate-setting standards, serving underserved communities, and offering access to previously uninsured motorists, thus reducing the number of uninsured drivers.

Moving forward: As in print, this measure is purely an elimination of the sunset date and changes the required report from every year to every 5 years. Should this measure evolve during the legislative process and morph into a measure that makes significant and new changes to the CLCA program, the committee retains the ability to call the bill back and determine whether a sunset date extension is better suited to further evaluate the CLCA program at a later date.

Previous Legislation: SB 570 (Rubio) Chapter 274, Statutes of 2019: This measure made several programmatic changes to the CLCA Insurance Program: eliminated a gender surcharge, expanded access to students, eased income eligibility reporting requirements, simplified the consumer notice, and extended the sunset to January 1, 2025.

SB 1273 (Lara) Chapter 487, Statutes of 2014: This measure extended, until January 1, 2020, the sunset date on the CLCA; expanded eligibility criteria to include drivers with less than three years of continuous driving experience and assessed a surcharge on those drivers; and mad other changes designed to increase participation.

SB 476 (Steinberg) Chapter 347, Statutes of 2013: This measure required a special purpose assessment of $0.25 until January 1, 2016, on each vehicle insured under an insurance policy issued in this state by the insurer and authorized the CDI to use up to $0.05 of the $0.25 assessment to notify insurers and other members of the public about the existence of the CLCA insurance program.

AB 1024 (Hueso) Chapter 401, Statutes of 2011: This measure authorized producers to sell CLCA policies through an Internet website, required CAARP to create a website for referring consumers to certified agents or brokers for the purchase of low-cost automobile insurance, and required the Department of Motor Vehicles to update the insert regarding the CLCA insurance program that is included in registration renewals to reflect the online program established by this bill.

AB 1597 (Jones) Chapter 234, Statutes of 2010: This bill extended the program sunset date to 2016 and made various statutory changes to conform its operations to standard California administrative practices and to provide for more efficient administration of CAARP.

AB 725 (Jones), 2009-10 Legislative Session, would have extended the sunset date and made other changes. Vetoed by Governor Schwarzenegger.

SB 20 (Escutia) Chapter 435, Statutes of 2005: This measure extended the sunset date on the pilot programs until January 1, 2011, and also expanded the low cost auto insurance programs to the Counties of Alameda, Fresno, Orange, Riverside, San Bernardino, and San Diego and made the expansion of the program subject to the discretion of the Commissioner (the program was extended to all counties after this bill).

SB 1427 (Escutia) Chapter 742, Statutes of 2002: This measure extended the sunset date of the pilot programs to 2007; reduced the premium; changed the gross annual household income limit from 150 percent to 250 percent of the federal poverty level; and established other duties to make the program more available to eligible consumers.

SB 171 (Escutia) Chapter 794, Statutes of 1999: This measure established the CLCA Insurance Pilot program in the County of Los Angeles until January 1, 2004.

SB 527 (Speier) Chapter 807, Statutes of 1999: This measure established the CLCA program in the County of San Francisco until January 1, 2004.

REGISTERED SUPPORT / OPPOSITION:

Support

California Department of Insurance

Support If Amended

Personal Insurance Federation of California

Opposition

None on file.

Analysis Prepared by: Kathleen O'Malley / INS. / (916) 319-2086