Representatives from California’s Department of Insurance and notebook computer maker ASUS Computer International have been visiting community colleges to introduce students to the state’s California Low Cost Automobile Insurance Program (CLCA).

In today’s economy, all Californians – especially students – are looking to save money. The CLCA program provides affordable liability-only auto insurance that meets the state’s financial responsibility laws for less than $400 a year.

“The CLCA is a great resource for many Californians, but it can be especially helpful for college students,” said Deputy Commissioner Chris Shultz. “For as little as $26 a month, students can get liability insurance through the CLCA program – satisfying California’s insurance requirements.”

The CDI said it recognizes that many students shop for bargains online, which is why it and ASUS representatives recently visited American River College in Sacramento to introduce the CLCA program and demonstrate the ease of applying to the program online.

The American River College visit was the second in the Insurance Department’s series of College events, with a third to follow next month at a community college in San Diego.

The eligibility requirements for the CLCA program include:

* An applicant must be a “good driver” – no more than one at-fault, property damage-only accident or one point for a moving violation in the past three years;

* No at-fault accident involving bodily injury or death in the past three years and no felony or misdemeanor conviction for a violation of the Vehicle Code;

* Family meets income eligibility limits of $27,225 for a single person, $36,775 for two persons and $55, 875 for a family of four;

* The value of an insured vehicle must not exceed $20,000.

“Every day, more than a million uninsured drivers hit the roads in California,” Shultz said. “The bottom line is that driving without insurance is illegal. The California Department of Insurance encourages all Californians to find out if they qualify.”

The California Low Cost Automobile Insurance Program was established in 1999 as a pilot program in Los Angeles and San Francisco. SB 20, passed in 2005, authorized the Commissioner to launch the program throughout the state upon his determination of need in each county. Beginning in April 2006, the department began expanding the program statewide, and in December, 2007 made the program available in every county of the state.

California Insurance Commissioner Dave Jones announced he filed for new rules with the Office of Administrative Law to add the gender-neutral term “spouse” to the application form for the state’s Low Cost Auto Insurance Program.

The change will improve capturing information of same-sex couples. Previously, the form included only the categories of “husband,” “wife,” or “domestic partner.”

“This change to the Low Cost Auto form will ensure that the application process is inclusive for all Californians,” Jones said in a media statement. “And I have also asked department staff to carefully review all the forms we approve to make certain the forms treat equally same-sex couples who were married in 2008, or those who may marry in the future.”

Currently same-sex marriages performed after 5 p.m. on June 16, 2008 through Nov. 4, 2008 are recognized in California. For other periods of time, California’s domestic partnership law applies.

The California Low Cost Automobile Insurance Program provides affordable auto insurance to low-income good drivers. Although California law requires that all drivers be insured, many low-income drivers can’t afford today’s car insurance rates.

By Erik Holm

Geico Corp., the car insurer owned by Warren Buffett’s Berkshire Hathaway Inc. (BRKA, BRKB), added 188,500 new customers in the first seven weeks of 2011, putting it on pace for its best quarter for new business in two years.

Customers are flocking to Geico as it spends ever-increasing sums on advertising. The company also appeared to be holding the line on prices while some rivals are raising rates in an effort to improve profit margins.

The two U.S. auto insurers larger than Geico, State Farm Mutual Automobile Insurance Co. and Allstate Corp. (ALL), were charging customers more for coverage at the end of 2010 than they were at the beginning. With price increases in 32 states and decreases in 10, State Farm’s overall auto insurance rate rose by 2.8% in 2010, a spokesman said. So far in 2011, the company has raised prices in eight states and cut prices in one state.

Geico, meanwhile, was charging its average customer about the same at the end of last year as it did at the start, according to Berkshire’s annual report on Saturday.

That pricing trend helped Geico attract 165,000 new policyholders in last year’s fourth quarter, and put the company on pace to add about 350,000 drivers by the end of March. That increase would be significantly more than in any three-month period since the first quarter of 2009, when consumers were drastically curtailing their spending amid the depths of the financial crisis.

Halfway through the record-setting first quarter of 2009, Buffett crowed then that he and Geico Chief Executive Tony Nicely felt like “two hungry mosquitoes in a nudist camp. Juicy targets are everywhere.”

In his latest letter to shareholders, Buffett said Geico had “enthusiastically” spent $900 million on advertising in 2010 after spending $800 million in 2009. While an exact comparison to the marketing budgets of other insurers is difficult, the figure is likely significantly higher than the next biggest spender.

Geico’s underwriting profit jumped 72% to $1.12 billion in 2010, while Allstate’s fell 30% to $766 million. State Farm, which is owned by its policyholders, is expected to report 2010 results Tuesday.

for Low-Income Californians As Poverty Rates Reach Highest Level In Decades.

Program Gives Lifeline In Tough Economy With No Taxpayer Cost

Governor Schwarzenegger has signed legislation – AB 1597 to maintain California’s innovative auto insurance program for low-income Californians with good driving records. The California Low Cost Auto Insurance program (CLCA) (http://www.insurance.ca.gov/0100-consumers/0060-information-guides/0010-automobile/lca/index.cfm), which was set to expire this year without AB 1597′s 5-year extension, has provided car insurance to more than 50,000 Californians and has seen a surge in policyholders in the wake of the recession and high rates of poverty, according to data from the California Department of Insurance.

The program offers a bare bones policy that is often half the price of the least expensive insurance coverage otherwise available in many communities. The CLCA premium can be as low as $161 per year (in Imperial County) and up to $368 per year (in Los Angeles County.) The prices are set by the Insurance Commissioner to ensure that there is no taxpayer cost for the program and that it does not require a subsidy from drivers who purchase standard auto insurance. To date, an estimated 85% of drivers who have purchased the CLCA policy were previously uninsured motorists.

“The low-cost auto insurance program is an example of government finding an innovative way to address a serious problem and doing it without stretching taxpayer dollars,” said Douglas Heller, Executive Director of Consumer Watchdog.

Consumer Watchdog (http://www.consumerwatchdog.org), which sponsored the 1999 legislation creating the program, has been working with community groups, insurance agents, the City of Los Angeles and the California Department of Insurance to raise awareness about the program. Lack of knowledge of the program among many qualifying drivers combined with a failure of many insurance agents to inform customers about the program, as required by law, has meant that there are thousands of uninsured drivers who could enroll if they were aware of the program. Consumer Watchdog’s outreach efforts and newly-created alliances aim to provide more motorists the opportunity to sign up for this critical program.

A 2008 report by the Insurance Research Council estimated that about 18% of California drivers lacked coverage. And according to new census figures, about 5.6 million Californians now live below the poverty line, which is about $22,000 for a family of four.

Douglas Heller continued, “Millions upon millions are struggling in this economy– and the Low Cost Auto Insurance program allows cash-strapped motorists a chance to drive legally. That’s not just better for low-income drivers, but it’s a relief to everyone on the road when fewer people drive uninsured.”

Background on California’s Low Cost Auto Insurance Program

In order to qualify for the program, drivers must have no more than one point on their driving record, must be 19 or over, with at least three years driving experience and cannot have an income exceeding $27,075 (or $55,125 for a family of four). Additionally, the insured vehicle must be valued at less than $20,000. The policy includes coverage for $10,000 in bodily injury per person, $20,000 per accident and $3,000 in property damage.

Under the law, every insurance agent in the state is required to inform prospective insurance policyholders about the program, if the driver seeks to purchase a basic auto insurance policy.

Since the inception of the program, approximately 69,760 Californians have applied for the program, with 56,778 of those being accepted into the CLCA program. For 2010, approximately 6,028 applications have been received and 5,765 assignments have made it into CLCA. Consumer advocates note that there have been more than 3,000 auto accidents in the past three years, and more than $8 million in claims paid, that were covered by CLCA policies and would likely have been uninsured accidents if it weren’t for the program.

With money tight and unemployment as high as it is in California, residents are looking to cut costs; even though allowing an auto insurance policy to lapse may seem like a tempting way to knock off a good chunk from the monthly bills, such a move could have dire consequences and may be more costly than automobile coverage itself. Having to pay out-of-pocket for an accident during an uninsured period could wind up being a much more painful financial hit. Californians have options that are available that may help avoid the risks of driving uninsured.

One such option is a program made available by the California Department of Insurance (CDI), which could assist some drivers who lack the income to maintain traditional coverage. The California Low Cost Automobile Insurance (CLCA) program, which is now available throughout the state, helps secure California auto insurance for residents who have at least three years of being continuously licensed, live below specified income levels, use a car worth less than $20,000 and maintain a relatively good driving record. Interested drivers can answer a short set of questions on the CDI’s website to determine if they are eligible.

The California Department of Insurance (CDI) is reminding drivers that California offers an affordable insurance program so all qualified motorists can drive with confidence.

There are millions of uninsured drivers in California, and the numbers are expected to get worse. In this faltering economy, 18 percent of drivers are expected to let their insurance go. But drivers can afford California’s Low Cost Auto Insurance program. The LCAI state sponsored program for struggling Californians who have a good driving record. In many areas of California, the program costs around $400 a year, making it even more affordable.

And it’s easy to qualify. The eligibility requirements include: An applicant must be a “good driver” – no more than one at-fault property damage only accident, or one point for a moving violation in the past three years.

Applicant must be at least 19 years of age or older and a continuously licensed driver for the past three years.
No at-fault accident involving bodily injury or death in the past three years and no felony or misdemeanor conviction for a violation of the Vehicle Code.

Family meets income eligibility limits of $27,075 for a single person, $36,425 for two persons and $55,125 for a family of four.

The value of an insured vehicle must not exceed $20,000.

To learn if you qualify, visit www.insurance.ca.gov/LOWCOST, or call (866) 60-AUTO-1 (866-602-8861).

By LIZ PULLIAM WESTON
LA Times

It would seem to be an ideal solution for cash-strapped drivers: Just as auto insurance premiums are poised to rise, the state is requiring insurance companies to offer a low-cost alternative.

Starting July 1, 2000, good drivers with low incomes can qualify for the new bare-bones policies, which will initially cost $450 a year in Los Angeles and $410 in San Francisco, the only two cities where the experimental coverage will be available.

Applicants can have no more than one ticket or “point” for a moving violation on their records in the past three years, and their incomes cannot exceed 150% of the federal poverty level, which means a four-member household could not make more than about $26,000 a year. Men ages 19 to 24, who are considered the highest-risk drivers, will pay an extra 25% for the policies; the coverage is not available to those under 19.

The policies will be available through insurance agents and will be administered by the California Automobile Assigned Risk Plan, the nonprofit organization that provides coverage for high-risk drivers.

The Legislature mandated the policies to try to combat the problem of uninsured drivers. The Insurance Information Network of California, a trade group, estimates that 1 out of 3 Los Angeles drivers has no insurance despite a state law that requires coverage. Statewide, the proportion of uninsured drivers is about 1 in 5.

The insurance industry, however, doubts that many uninsured drivers will sign up. That means the program may be of greatest interest to the working poor who have insurance.

To make the low premiums feasible, the Legislature lowered the amounts of liability coverage the policies offer. Instead of the current minimum required by law–$15,000 in coverage for bodily injury per person, $30,000 of total bodily injury coverage per accident and $5,000 for property damage–the low-cost policy limits are $10,000, $20,000 and $3,000.

Liability coverage essentially pays for any harm a driver inflicts on other people; bodily injury liability, for example, pays for the medical costs, lost wages and pain suffered by the other driver and any passengers, while property damage basically covers the dings and dents to the other car.

Because most accidents are fender benders that cause less than $1,000 in property damage and don’t result in injury, it would seem that the new low-cost policies would provide enough coverage for most situations.

And that’s true, as long as you don’t have much to lose. If you have a home, a decent job or any savings, however, the bare-bones policy–and the state’s regular minimum policy, for that matter–could be the most expensive choice in the long run.

Kenneth Brownlee, a sales and service center manager for Nationwide Insurance Cos., which recently opened three new offices in urban Los Angeles, said he frequently encounters consumers with far more at stake than they realize.

Brownlee, who manages Nationwide’s Crenshaw office, estimates at least one-third of the people he contacts have too little liability insurance. Some own homes free and clear, yet carry the minimum insurance required by state law, Brownlee said.

One bad accident could rob these drivers of everything they own if the victims, or their insurance companies, decide to sue for more than the policy limits.

Those who don’t have home equity or savings to lose could find their paychecks garnisheed to pay the cost of a lawsuit judgment.

Although premiums vary wildly by company and area, a woman in Compton with 10 years of driving experience and a clean driving record could pay $466 to $2,312 a year for basic liability insurance, according to the state Department of Insurance’s 1999 premium survey.

Most major insurers would charge her $600 to $1,200 for coverage.

So if the woman worked a low-wage job, had little savings and rented rather than owned a home, the new low-cost policy probably would make more sense for her than most coverage currently available.

Most drivers have enough to lose, however, that higher liability limits are advisable. (See accompanying “Financial Planner” for a liability checklist.)

Financial advisors and insurance experts recommend that most people carry liability coverage of $100,000 per person and $300,000 per accident, with at least $50,000 of property damage. Once your income or net worth surpasses six figures, even higher limits are usually recommended. Most auto insurance liability tops out at $500,000 per person or accident, but personal liability or “umbrella” coverage is available to stretch that limit to $10 million.

Interestingly, it doesn’t cost all that much more to dramatically increase coverage. Boosting liability coverage from the state’s minimums to $100,000 per person for bodily injury, $300,000 per accident and $50,000 property damage–or about 10 times the state minimum–would add about $200 to the average annual premium, according to State Farm actuaries.

That may be money a low-income driver doesn’t have, of course, and if it’s a choice between groceries and added coverage, there’s no choice at all.

For those who do have the option, however, it makes sense to do a little comparison shopping and understand the risks before deciding to opt for the cheapest policy.

By David Benda

Donna James says the value of California’s Low Cost Automobile Insurance Program (CLCA) to her is priceless.

“It’s been a godsend,” the 57-year-old Redding resident said. “I would either have to drive illegal(ly) or park my car” without it.

Launched as a pilot program in July 2000, CLCA provides low-cost liability insurance to good drivers who don’t have the financial capability to afford market-rate insurance.

The Great Recession and a focused effort by state officials to get the word out significantly increased participation in CLCA in 2009. The program is administered by the state, but policies are written by licensed insurance companies.

Last year in Shasta County, 175 people signed up for the program, up from 49 in 2008. The low-cost insurance program first became available in Shasta County in October 2007.

Statewide, the program saw a 19 percent jump in use in 2009 compared with the year before. Approximately 7,500 applications to the CLCA were approved in 2009 compared to 6,306 in 2008. The most active month was April 2009 with 727 applications filed.

State law requires that drivers carry a minimum of $15,000 per person for bodily injury liability coverage, $30,000 per incident and $5,000 for property damage.

In order to offer affordable policies through CLCA, legislators allowed eligible drivers to carry lower standard limits of $10,000, $20,000 and $3,000, respectively.

“We saw a huge jump in interest when they started advertising on TV,” said Kelly Bickett, who owns Northern California Insurance in Redding with her sister, Pam Severtson.

James saw the TV pitch and ultimately bought a policy through Bickett’s office. James drives a 2000 Honda Civic and pays just under $300 a year.

“I did have coverage but it outgrew my income,” said James, who was paying about $800 annually for her previous coverage.

Mark Billingsley, a state Department of Insurance spokesman, said CLCA is not subsidized by taxpayers.

There is a 30-cent assessment made on all auto insurance policies sold that is used to fund Department of Insurance auto-related programs such as CLCA, Billingsley said.

“Of that 30 cents, 5 cents is used for the operation and marketing of CLCA,” Billingsley said in an e-mail. CLCA’s annual marketing budget is $1.4 million.

Program rates are set and adjusted annually in each county. The average premium under the program in Shasta County is $242. James pays a little more because she has opted for two additional coverages.

Troy Rauh of Redding pays $242 for his 1969 Ford pickup to be covered under a CLCA policy. Rauh, 49, also bought his policy through Bickett’s office.

“I have been out of work for a long time, I am taking 14 units at Shasta College and I don’t have a lot of money for insurance,” said Rauh, who worked construction for three decades before he was laid off two years ago. “The coverage is not that high – it’s just bare bones – but it’s a great opportunity for me to keep food on the table.”

Bickett said some agents and brokers shy away from writing CLCA policies because they do a lot of work for little return. But Bickett considers it a way to increase business in these tough times.

“One of the cons would be the massive paperwork shuffle because it involves the state and you have to get a special license,” Bickett said.

Billingsley acknowledged there were complaints about the paperwork when the program first started.

“With the online application process, it now takes agents less than 20 minutes to go through the entire process of entering information,” Billingsley said.

Agents only get a 12 percent commission writing CLCA policies – compared with 15 to 20 percent with a typical auto policy – but if companies actively market the program, there’s money to be made through volume, Billingsley said.

“It depends on the mind-set of the agent,” Billingsley said. “The program is there to help consumers, not to make agents a lot of money.”

Reporter David Benda can be reached at 225-8219 or at dbenda@redding.com.