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Letter to the Editor

First Low-Cost Flat Rate Auto Policies Available in California

SACRAMENTO, Calif. -- California's pilot program to offer low-cost auto insurance at a flat rate, for residents of San Francisco and Los Angeles counties, became available this month.

Regulators and legislators have said areas with a high percentage of uninsured motorists need an alternative to make affordable insurance available. The uninsured motorist population is more that 23 percent in San Francisco County and nearly 32 percent in Los Angeles County.

The low-cost policy is the first low-cost "flat-rate" policy of its kind in the nation, according to the Foundation for Consumer and Taxpayer Rights, a nonprofit consumer group that supports the program. To qualify for the policy, a driver must be low income -- earning less than 150 percent of the poverty level, which is $25,575 per year, per household -- and must have a driving record with no more than one violation point.

In October, Gov. Gray Davis signed new laws to establish the program, which is being administered by the California Automobile Assigned Risk Plan. Every auto insurer in the state is required to participate in the plan, which has historically offered insurance to drivers with bad records who can't find auto insurance elsewhere.

Davis also signed legislation to give tax credits to insurance companies that participate in the program and to extend the law requiring drivers to show proof of insurance when they register their vehicles.

The pilot program stemmed from proposals by state Democratic Sens. Martha M. Escutia and Jackie Speier, the Senate's insurance committee chairwoman. Each bill originally called for insurance companies to offer a statewide low-cost plan to low-income residents who qualify as good drivers.

The pilot program lowers liability limits to $10,000 for bodily injury per person; $20,000 for bodily injury per accident; and $3,000 in property damage. The state normally requires a minimum of $15,000 for bodily injury per person; $30,000 for bodily injury per accident; and $5,000 for property damage.

Eligible Los Angeles residents would pay $450 in annual premiums, while San Francisco residents would pay $410. Additionally, drivers aged 19 to 26 would pay a 25 percent surcharge and the insured's vehicle couldn't be valued at more than $12,000.

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