OAI: Auto Insurance Proposal Puts Spotlight on California's Extensive Regulation

January 23, 2012 (PRLEAP.COM) Business News
The news that Californians will once again get a chance to vote on whether coverage providers should be able to give discounts to consumers for switching insurance companies highlights the extensive regulation that insurers are subject to when setting rates in the Golden State, according to Online Auto Insurance.

Supporters of a new initiative say that allowing insurers to give policyholders discounts based on whether they were previously insured, regardless of the company that issued the policy, will increase competition in the marketplace. But opponents say the measure could hurt some residents, with consumers who are generating online auto insurance quotes for the first time seeing higher rates simply because they haven't established a coverage history. The same would happen to drivers who have gone car-less for a period of time.

If the initiative passes, insurers would be able to consider the past five years of an applicant's coverage history no matter who provided that coverage.

The measure would alter the provisions of Proposition 103, which outlined three mandatory factors and 16 optional factors car insurers can use to price policies. Voters approved those regulations in 1988.

The three mandatory factors are drivers' safety record, their annual mileage and years of driving experience.

Among the 16 optional factors is "persistency," meaning whether a motorist already had coverage in place. But part of the current regulations say that an insurer can only offer a discount if it or one of its affiliates was the company providing that coverage. So if consumers are switching companies, they are ineligible for the discount.

Source: http://www20.insurance.ca.gov/epubacc/REG/115830.htm

The new proposal, which the California Secretary of State says has qualified for the November 2012 ballot, would change that.

The measure is very similar to Proposition 17, which was put before voters in June 2010. When Californians voted on that initiative, 51.9 percent rejected it.

To learn more about this and other car insurance issues, readers can go to http://www.onlineautoinsurance.com/ where visitors will find informative resource pages and a quote-comparison generator that can help them track down the best rates for a policy.