Schwarzenegger Terminates Bill for Low-Cost Auto Insurance


Despite unanimous support from State Assembly, Governor Arnold Schwarzenegger vetoed a bill aimed at extending California’s low cost auto insurance program for low-income vehicle owners. AB 725 provides auto insurance liability policy to poor residents, an aid that has become especially important because of record-high unemployment rates and the worst economy seen by California in decades. The program would have continued to provide responsible drivers with $350 in annual aid for five more years. Since approved in 2000, AB 725 has provided 48,940 low-cost policies to motorists, around 96 percent of whom had no coverage prior to enrollment.

Schwarzenegger Terminates Bill for Low-Cost Auto InsuranceLegislators intended to extend Assembly Bill 725 until 2015 but Schwarzenegger’s veto will end it by the end of 2010. For the past three years, California’s Low-Cost Auto Insurance has paid more than $8 million in claims to policyholders without drawing from taxpayer’s money. Without the program, uninsured motorists in the state would have been paid for by insured drivers or the public healthcare system.

Lawmakers from say Low-Cost insurance is much needed by residents especially that unemployment rates have gone up to 12.2 percent this August, the highest it has seen since postwar era. They add that not only residents but the whole economy has benefited in the program as well. Motorists who previously were uninsured were able to receive coverage when they engaged in accidents while insurers for their part note huge increase in their number of clients. This has kept money flowing in the state which is significant in California’s struggle for recovery.

Before AB 725 was approved, many motorists were not able to purchase policy since only clients whose income is 250 percent above poverty level were generally approved by insurers. Because of the bill, residents managed to meet minimum coverage requirements at the average cost of $20 per month.

Consumer advocates expressed their dismay over Schwarzenegger’s decision, saying it would have had greatly helped Californians who are still suffering from the tremendous effects of recession. Prior to the veto, advocacy groups requested residents to express their support by contacting Schwarzenegger through his website or via phone.

Meanwhile, the governor says in his veto message that he understands the need to provide low-cost California auto insurance but he doubts its effectiveness because of the number of other policies in effect and low participation among uninsured residents. However, he says further observation could be made before it expires in January 1, 2011 so changes could be made for its progress.

AB 725 was authored by Assembly Man Dave Jones and was co-authored by Assembly Woman Norma Torres.