American Agents Alliance Executive Director Ken Nigohosian says the association will maintain its opposition to Senate Bill 20 (Escutia), despite recent amendments to the bill.
SB 20 would mandate the continuance of California’s low-cost automobile insurance pilot program beyond the Jan. 1, 2007 sunset date. The measure would also expand the program to additional California counties. The program is currently only available in Los Angeles County and the city and county of San Francisco.
Recent amendments stipulate the insurance commissioner shall conduct a needs assessment to determine in which additional counties to offer the program. The bill also mandates that rates must be actuarially sound on a county-by-county basis.
The bill recently passed out of the Assembly Insurance Committee. It will next be heard before the Assembly Appropriations Committee.
“The Agents Alliance has serious reservations about the effectiveness of the pilot low-cost automobile insurance program,” Nigohosian said. “We are concerned with the low retention rate for low-cost auto policies. We are concerned with the percentage of existing policyholders who have opted to take the low-cost policy, possibly creating many more underinsured consumers. And, we are concerned that the pilot program has not significantly reduced the percentage of uninsured motorists in many areas of Los Angeles and San Francisco County.”
Nigohosian commented that the intention of the pilot program was to offer low-income consumers a way to comply with the state’s mandatory auto financial responsibility law. “The results of the pilot program show that no matter how low you price an auto insurance product, there will be a percentage of the population who simply will not – or cannot – purchase a personal automobile insurance policy.”
Nigohosian added, “The Agents Alliance firmly believes that the most effective way to provide automobile insurance products to consumers is through the private market. Insurance carriers offer a myriad of different auto insurance products for a wide variety of drivers. In addition, California’s Assigned Risk Plan is available to consumers who cannot obtain coverage from the private market. California’s automobile insurers have skilled actuaries, underwriters and adjusters who have years and years of experience in determining pricing methodology for their products and how to market their products to consumers. While the pilot low-cost auto insurance program was well-intentioned, we recommend that state regulators allow auto insurance products to flow through the effective private market system.”