June 30, 2000
By ANTHONY BREZNICAN
Associated Press Writer
LOS ANGELES -- An experimental plan to reduce the number of uninsured motorists by lowering coverage costs in Los Angeles and San Francisco begins Saturday with civic leaders in Washington and other states watching to gauge whether it could succeed elsewhere.
California's mandatory proof-of-insurance law requires the owners of the state's nearly 27 million vehicles to show they have coverage when they register with the Department of Motor Vehicles.
"Now many people who can't afford regular coverage will no longer have to make that unfair decision between breaking the law and getting to work," said Douglas Heller of the Santa Monica-based Foundation for Taxpayer and Consumer Rights.
Only drivers with relatively clean records are eligible for the four-year pilot program, which charges $450 annually for a bare-bones auto policy in Los Angeles County and $410 in the San Francisco area. A 25 percent surcharge is added for unmarried, male drivers between the ages of 19 and 25.
Those costs can typically double or triple in high-risk, inner-city areas, where many residents risk illegally driving without insurance rather than pay potentially devastating premiums.
Nearly 1.8 million vehicles out of 6 million in Los Angeles lack insurance, with nearly 80,000 uninsured vehicles out of 412,000 in San Francisco, according to Tim Hart, spokesman for the state Insurance Department.
"But we don't know how many of the people in those areas will qualify for the program," Hart said. "That's why it's called an experiment. We're waiting to see if this works."
Participants must have clean driving records and meet numerous other guidelines to be eligible for the program, including maximum annual income restrictions.
One of those paying high premiums for a bare-bones policy now is 66-year-old Grace Luna, a retired union worker who lives in South Gate, a blue-collar community southeast of Los Angeles that is more than three-quarters Hispanic.
"I believe it's the best insurance that's ever come along," said Luna, who has already completed an application for the low-cost policy.
"The insurance company I'm with now, they are charging me more than $700 yearly, and the broker who handles my policy is charging me $150 yearly, and that's a heck of a lot of money for me," she said.
Luna, who said she is disabled and survives on Supplemental Security Income, doesn't mind that her new insurance policy will provide only basic liability coverage and won't pay for damage to her car, even if an uninsured driver hits it. She said the policy she has now on her 1980 Chevrolet Citation offers the same coverage.
"And this is better, you know, because it's so low-cost."
The program, approved by the Legislature last year, will be administered by the California Automobile Assigned Risk Plan, a state-commissioned coalition of insurance companies. The agency also finds car insurance for problem drivers who would have difficulty getting it otherwise.
Insurance company lobbyists and consumer advocates agree that all insured motorists may eventually benefit from the low-cost plan because the cost of uninsured motorist coverage will diminish.
"That's because the likelihood of running into someone who doesn't have insurance will go down," Heller said. "It's the secret gift of this new plan."
Meantime, officials from Connecticut, Illinois and New Jersey have asked consumer advocacy groups for data on whether significant numbers of people sign on to the new plan.
Washington, Kentucky and Louisiana, which have considered similar programs, are also monitoring the program's success, CAARP regional director Richard Manning said.
