California Insurance Commissioner Ricardo Lara on Thursday released revised draft regulations to expand drivers’ access to group discounts.
The revised draft regulations will extend discounts to previously underrepresented drivers in the first major reform of group discounts since voters approved them in 1988 with the passage of Proposition 103.
“Insurance companies must give greater access to auto insurance discounts for low-income drivers and people of color, regardless of their educational attainment,” Lara said in a statement. “Our nearly two-year examination has concluded that group discounts skew toward wealthier, more highly educated, and whiter areas of the state, so working families are often left out. With this pandemic continuing to dramatically widen the country’s income and equality gap, I am proposing these new rules that make car insurance discounts more equitable and available to the communities who can least afford to pay more for insurance. Whether you’re a doctor or a janitor with comparably safe driving records, you should have the same access to these discounts.”
The American Property Casualty Insurance Association has asserted that the regulations could eliminate many affinity group insurance discount programs.
The APCIA has been reached out to for comment on this latest development.
The California Department of Insurance wrote the initial draft regulations after Lara ordered an investigation of group discounts to go along with an extensive data collection effort.
Their findings show that while one-fourth of Californians receive a group premium reduction ranging from 1.5% to 25.9%, participation in group discount programs decreases with declining income and education levels.
Those living in ZIP codes with average per capita income above $49,000 are more than twice as likely to receive discounts as those in ZIP Codes with average per capita income of $22,500 or below. In some areas of Los Angeles, San Diego, and the Bay Area, participation in group discount programs in high-income ZIP Codes was three to four times higher, according to the CDI.
Lara proposed the revised draft regulations after holding a workshop with consumers, business and membership groups, and insurance companies on Jan. 27, 2020.
The revisions include:
- Reducing barriers to the creation of new groups for lower-income drivers. The revised draft regulations require that insurers offering group discounts make sure they are available to drivers at different income levels who have similar driving experience.
- Increasing incentives for the creation of new groups for underserved communities. The revised draft regulations now include an incentive system whereby insurers who excel in writing policyholders from underserved socio-economic communities will receive a small increased allowance in their expense calculation to account for the added costs of making this effort.
- Increasing public awareness of available groups. Currently insurance companies must provide a list of all available discounts to every new policyholder at every renewal. The revised draft regulations now require that all of an insurer’s available group plans must also be included in this list to help drivers avail themselves of discounts they may be entitled to but not aware they presently exist.
The CDI will hold its second prenotice virtual workshop on the revised draft regulations on March 23. The purpose of the workshop is to provide interested and affected stakeholders another opportunity to comment on the proposed regulation changes.
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