Monday, December 14 – proponents of the car insurance initiative in California or “The Continuous Coverage Auto Insurance Discount Act” have gathered 720,000 signatures, enough to support it for the 2010 ballot. However, groups against the discount act are coming out and saying that this proposed initiative is nothing more than a “wolf in sheep’s clothing.” Insurance insiders are starting to doubt whether the motive behind this initiative is really to promote benefit of consumers.
According to experts, a provision saying that the extending of premium discounts will not apply to policy holders who had a lapse in coverage is what bothered consumer groups and prompted them to investigate on the real purpose of this initiative.
The present practice of California insurance companies is to give discounted premiums to loyal drivers who have remained a customer for a long period of time under the same plan from the same provider. However, if you a driver who has been insured by company A for 10 years, but suddenly find yourself transferring to company B, discounted premiums you enjoyed from company A will not be extended now that you are with a different provider, and you will have to start from scratch, paying original rate or even a higher amount. Granted that “The Continuous Coverage Auto Insurance Discount Act” will be approved, it allows companies to extend the discount if long time customers transfer from one provider to another.
Going back to the provision regarding drivers with long coverage lapses, experts say that the discount act is simply a subtle way of allowing providers to have a leeway for raising prices. Campaign for Consumer Rights spokesperson Doug Heller said that this discount extension can result to providers penalizing motorists with expensive surcharges for lacking auto insurance for more than three months over the last 5 years.
Drivers who canceled their plans 90 days ago for missing regular payments will also have to pay surcharges if they reapply for car insurance. Heller adds that the issue at hand is not about receiving a discount or not, but rather, it is about the fact that if one driver is granted a discount, someone somewhere has to pay for that discount.
Consumer advocates who side with Heller said that it would be very unfair for drivers who will be charged a huge penalty, especially if these drivers are ones who had to cancel plans because of getting laid off and defaulting in payments and who are now recovering and wanting their vehicles to be insured once again.