Advocates Have High Hopes for Auto Insurance Initiative


Lobbyists greatly affect state legislations. But with the new auto insurance initiative, consumers can finally speak what is on their mind. At least that is what consumer advocacy groups believe. Since the signature gathering began this week for an auto insurance initiative, advocates have expressed high hopes over the initiative ballot in 2010. Advocates say the initiative will help trim down costs for millions of California motorists who maintain auto insurance coverage.

Advocates Have High Hopes for Auto Insurance Initiative State laws allow insurers to give a discount to policyholders who have maintained continuous coverage with them. This is usually referred to as a loyalty discount. But consumers who shift to other providers will have to start with a clean sheet, and for obvious reasons will not be given “loyalty” discounts.

This month, state legislators have proposed the Continuous Coverage Auto Insurance Discount Act, aimed at providing discounts to consumers who maintain coverage whether they stay with the same insurer or not. Advocates say the proposed legislation will benefit many, since 82 percent of California motorists maintain auto insurance. They also say that lower prices and more options will encourage uninsured motorists to purchase insurance and help underinsured drivers meet state requirements.

Analysts who support the proposal say it will also improve competition among car insurers in the state. This is because consumers will be encouraged to shop around more often in order to find better deals. They add that insurers will consequently be prompted to offer lower prices, better coverage, and services to lure policyholders.

Legislators say there are already many states which offer the discount to new and existing policyholders. Some states they cited are Oregon, New York, Texas, Florida, and Washington.
The proposal will also include other changes such as basing premium rates primarily on driving safety record, driving experience, and miles driven annually. Discounts for good drivers, outstanding students, and those who have participated in advanced driving courses will remain in place.

Several groups and consumer advocacy organizations also expressed their support for the proposed legislation, among them are Consumers Coalition of California, Consumers First, California Alliance for Consumer Protection, California Mexican-American Chamber of Commerce, and California Black Chamber of Commerce.

However, many auto insurers warn against the negative impacts of the proposal. They say it will only force them to give lesser discounts to policyholders, since they have to cushion the losses they are bound to incur after the changes.

California has a history for launching initiatives to help consumers, such as the one in 1978 that has stopped a 4-year continuous rise in car insurance cost.