A voter initiative in California is set to appear on the June 8, 2010. This initiative will evaluate the continuous discount in auto policies offered by providers in the state. Authorities are trying to find out if the current regulations on discount offering are still fair for both drivers and insurers.
According to the California Department of Insurance, ballot aims to reward motorists who have been insured for a long period of time by making them eligible for what they call a “persistency discount”. The Department adds that for drivers can still be qualified of the said discount even if they change their insurance providers, provided that their provider does not make changes in its rate plan. If the insurance company changes its average policy charges, then it can result to a surcharge for other motorists.
Based from Proposition 17 or the Continuous Discount Initiative, the State Insurance Department commented that there is no way of finding out in advance the exact effect of a certain factor on each insured motorist. No one can predict the effect of uninterrupted prior insurance until the provider furnishes the Department of Insurance a copy of its specific reports.
In California, each insurer company must have a standard ‘rate plan’ that ascertains the average premium charged to each customer. Included in the rate plan is the corresponding ‘surcharge’ for every ‘discount’ so that every factor causing any change in the premium rate will balance evenly over the company’s book of accounts. It has been reported that the Continuous Coverage Auto Insurance Discount Act is based on the aforementioned principle. The California Insurance Department emphasized that there is a need to companies to come up with a surcharge that will balance its continuous policy discount offerings. This balance between auto policy discounts and surcharges is very important so that each premium rating factor used by an auto policy provider is evenly balanced in accordance with the provider’s rating plan.
On the other hand, consumer advocacy group Campaign for Consumer Rights has clearly taken its side, opposing the voter’s initiative. Representatives from the groups said that the analysis made by the Insurance Department will simply grant companies the power to increase premium rates for many motorists in California. Consumer advocate Harvey Rosenfield said that Commissioner Poizner gave the Attorney General a definitive analysis needed to accurately go over the main points of voter’s initiative. Rosenfield said that if the initiative is passed, then price increases will certainly take place which can result to surcharges of roughly 45% for students and unemployed motorists, even if they are not insured.
