A judge invalidated a California state law that would have allowed discounts for longtime auto insurance customers who switch insurers, according to the Associated Press.
Superior Court Judge Dzintra Janavs sided with consumer groups and the California Insurance Commissioner, who argued that the law did not further the purposes of Proposition 103.
Proposition 103, approved by California voters in 1988, requires auto insurers to base their rates mostly on a motorist’s experience, safety record and miles driven. It specifically barred such factors as a driver not having insurance or having a break in coverage when determining rates. It also prohibited insurance companies from penalizing people who had let their insurance lapse or were uninsured when setting rates.
Gov. Gray Davis signed a bill last year that allows an auto insurer to offer discounts to new customers who have a record of maintaining coverage with a competitor.
Davis defended the bill at the time, saying it encouraged competition by allowing customers to leave their insurers for a cheaper plan without losing their discount.
The law was challenged in court by Foundation for Taxpayer and Consumer Rights, Consumers Union, Public Advocates, the Southern Christian Leadership Conference and the National Council of La Raza.
State Insurance Commissioner John Garamendi, a defendant in the lawsuit, sided with the plaintiffs, saying the law thwarted the will of Proposition 103.
“This bill provided a very small benefit for drivers who had previous insurance at the expense of drivers who did not,” Norman Williams, an insurance department spokesman, said. “It was a financial discouragement against obtaining insurance for uninsured drivers.”
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