Gov. Gray Davis signed SB 841 Aug. 2, which will allow discounts to drivers who maintain auto insurance coverage, according to the Associated Press.
The measure could reportedly lead to higher premiums if drivers let their coverage lapse for more than 90 days.
Consumer groups responded by saying the bill penalizes first-time insurance buyers, and accused Gov. Davis of signing the bill in the best interests of Mercury Insurance, the bill’s sponsor and a major contributor to Davis’ political campaign.
Davis released a statement saying the bill furthers the intent of Proposition 103 by encouraging competition among insurance companies, allowing customers to leave their insurers for a less expensive plan, all while maintaining their discount.
The Foundation for Taxpayer and Consumer Rights has said it will file a lawsuit to stop the bill. The California Department of Insurance and Insurance Commissioner John Garamendi, also opposed the bill, saying it goes against Proposition 103.
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