California Auto Insurance Blog

NAMIC dailyLead | 01/12/2009

Experts and insurers believe electronic stability control is the best thing in automobile safety since seat belts. Full implementation of stability control in 100% of vehicles by 2012 could save thousands of lives, the federal government says. “Our recommendation to consumers is that you want to buy a vehicle with electronic stability control,” said David Zuby, a vice president of the Insurance Institute. San Jose Mercury News (Calif.) (01/12)

 WHAT IS IT?  A program established by the California Legislature that provides low-income good drivers who live in California with low cost auto insurance coverage.  This pilot program became effective on July 1, 2000, for qualified residents of Los Angeles County and the City and County of San Francisco.

§  On April 1, 2006, the Program was expanded to qualified residents of Alameda, Fresno, Orange, Riverside, San Bernardino and San Diego counties.

§  On June 1, 2006, eight additional counties were added to the Program:  Contra Costa, Imperial, Kern, Sacramento, San Joaquin, San Mateo, Santa Clara and Stanislaus, for a total of sixteen eligible counties.

§  On March 30, 2007, the six additional counties of Merced, Monterey, Santa Barbara, Sonoma, Tulare and Ventura were added for a total of 22 eligible counties.

§  On October 1, 2007, 20 new counties were added:  Amador, Butte, Calaveras, El Dorado, Humboldt, Kings, Lake, Madera, Marin, Mendocino, Napa, Placer, San Benito, Santa Cruz, Shasta, Solano, Sutter, Tuolumne, Yolo and Yuba will join the current counties of Alameda, Contra Costa, Fresno, Imperial, Kern, Los Angeles, Merced, Monterey, Orange, Riverside, Sacramento, San Bernardino, San Diego, San Francisco, San Joaquin, San Mateo, Santa Barbara, Santa Clara, Sonoma, Stanislaus, Tulare and Ventura.

§  On December 10, 2007, the final 16 counties of Alpine, Colusa, Del Norte, Glenn, Inyo, Lassen, Mariposa, Modoc, Mono, Nevada, Plumas, San Luis Obispo, Sierra, Siskiyou, Tehama and Trinity were added, making it a statewide Program

The California Low Cost Automobile Insurance Program (LCA) is administered by the California Automobile Assigned Risk Plan (CAARP).

WHO IS ELIGIBLE? Only low-income good drivers are eligible for this coverage.  Applicants also must reside in one of the approved counties, and the current value of their vehicle cannot exceed $20,000.  Eligibility is based on the household’s gross annual income which must be 250% or less of the federal poverty level.  See chart below.

WHAT IS A “GOOD DRIVER”?

§  Applicant is at least 19 years of age and has been continuously licensed to drive for the past 3 years.*

§  Applicant has no Vehicle Code felony or misdemeanor convictions on their driving record.

§  Applicant has not had an at fault accident involving bodily injury or death in the past 3 years.

§  Applicant has not had more than one, or both, of the following in the past 3 years:

o    A property damage only accident in which they were principally at fault, or

o    A point for a moving violation.

§  Applicant is not a college student claimed as dependent of for federal/state income tax purposes.

o    Individuals who were previously licensed in another country other than the U.S. or Canada and can demonstrate that they have been continuously licensed for 18 months in the U.S. or Canada, are also eligible.

WHAT COVERAGES ARE AVAILABLE? Liability limits of $10,000 bodily injury or death per person, $20,000 bodily injury for each accident and $3,000 property damage for each accident.  These limits will satisfy the state’s current financial responsibility laws.  Medical Payments Coverage at $1,000 per person, and Uninsured Motorist Bodily Injury at limits of $10,000/$20,000, are also available at the option of the applicant.

Physical Damage (Comprehensive & Collision) coverage IS NOT available under this Program.

WHAT DOES IT COST?

WHAT ARE THE PAYMENTS PLANS?

HOW DOES ONE APPLY?

If you meet the eligibility requirements, contact any insurance agent and ask if they are a Certified Producer with the California Automobile Assigned Risk Plan/California Low Cost Automobile Insurance Program.  If they are certified, they can help you in applying for automobile liability insurance through the California Low Cost Automobile Insurance Program.  This individual can assist you in completing an application and tell you about the payment plan options.

If you need a list of certified producers in your area, contact CAARP’s Customer Service Department at their toll free number 866-602-8861.

Once you find a certified producer in your area, they will help you complete an application for insurance, plus collect the required deposit and documents needed for this Program.

Once the producer has completed the application, they will mail everything to the CAARP office in San Francisco.

WHAT DO I NEED TO GIVE MY AGENT? Applicants will have to provide income verification in the form of one of the following:

A copy of their federal or state income tax return if filed in the previous calendar year, or if filed in the current year, whichever is most recent, or

Other reliable evidence from a governmental agency or government means tested program verifying the applicant’s annual gross income.

Applicants must also provide:

Check or money order made payable to CAARP/CA Low Cost Program

Copy of the driver’s license for ALL drivers in the household

Copy of the vehicle registration or proof of vehicle ownership.

Signed Privacy Waiver Form for each member of the household 18 years of age or older.  This form ensures that your total household income can be verified.

NOTE  You can pay CAARP/Low Cost Program directly.  Your agent/producer does not have to submit their check on your behalf.

CAN THE PRODUCER CHARGE EXTRA FEES? No.  Per 11624.5 of the California Insurance Code, producers CANNOT charge their clients ANY fee when submitting an application through the California Low Cost Automobile Insurance Program.  The producer will be paid commission by the assigned insurance company.  This means no “broker fees”, “paperwork fees”, or MVR fees can be charged.

WHEN IS COVERAGE EFFECTIVE? Only Certified Producers may submit applications to the California Low Cost Automobile Insurance Program and obtain immediate coverage through CAARP’s Electronic Effective Date Procedure (EEDP) or through EASi.  Proposed effective dates are only honored if the producer complies with all of the rules governing the EEDP and/or EASi.

Applications submitted without using the EEDP or EASi will become effective at 12:01 A.M. the day after receipt in CAARP’s office.  Future effective dates are also available via the EEDP and EASi.  To receive a future effective date, CAARP must receive the application before that requested date.

HOW LONG WILL IT TAKE BEFORE I KNOW I AM INSURED? Once CAARP receives the application with attached documents and deposit, it will determine whether or not the applicant is eligible per the requirements of the Program.  There are 3 possible scenarios:

1.     Applicant is determined to be eligible and application with deposit is assigned to an insurance company.  Assignment notices are mailed to both producer and inured.  The Insurance Company receives the application, attached documents and deposit.

2.     Applicant is temporarily determined to be eligible, but required information/documentation is missing.  Application is RETURNED to the producer to complete or attach the missing information within 10 working days.  If missing information is returned within the 10-day time span and satisfies the requirements of the Program, the application will be assigned.

3.     Applicant is determined to be not eligible and application for insurance is REJECTED.  Both applicant and producer will be notified in writing with the reason(s) for rejection and the application with deposit will be returned to the producer of record.  THERE WILL BE NO COVERAGE.  Note: If producer uses EASi, the system will determine immediately whether the applicant is eligible.

WHEN CAN A COMPANY CANCEL? Like with any insurance, the Low Cost policy can be canceled if the applicant fails to pay their premiums, or if the company determines there is any fraud or misrepresentation.

CAN I CHOOSE THE ASSIGNED COMPANY? No.  Applications are assigned via a random assignment process.

CAN THE PRODUCER RETAIN COMMISSION? No.  The producer is required to send the application with the appropriate gross deposit premium to the Plan.  The assigned insurance company will pay the producer his/her commission upon issuance of the policy.

WHERE DO I REPORT A CLAIM? Each company sends information with every policy about how and where to report claims.  Contact the company directly as soon as information about a claim is known.

WHAT SHOULD I DO IF I HAVE A PROBLEM? If you experience a problem with the assigned company or your producer regarding your insurance, it is recommended to call the company or producer directly to try and solve the problem.  If the problem cannot be resolved, contact CAARP/LCA Program at 866-602-8861 and a customer service representative will try to assist you.  Se Habla Espanol !

WHAT ELSE DO I NEED TO KNOW ABOUT THIS PROGRAM?

§  There is a maximum of one car per Low Cost Auto Insurance policy.  (You cannot add other cars to an existing policy.)

§  Only two Low Cost policies can be purchased per person, per household.

§  The policy term is for one year with annual renewals.  If the applicant still meets all of the eligibility requirements at renewal, the company must offer a renewal.

§  A Low Cost policyholder cannot purchase additional liability insurance coverage for their covered vehicle(s), but they can purchase physical damage coverage elsewhere.

Copyright 1999-2009 AIPSO. Includes copyrighted material of Insurance Services Office, Inc., with its permission.  Copyright, Insurance Services Office, Inc. 2009. All Rights Reserved.

10:00 PM PST on Wednesday, December 31, 2008

By JIM MILLER
Sacramento Bureau

SACRAMENTO – California still has millions of uninsured drivers despite a 2-year-old law designed to stop people from letting their policies lapse soon after they register their vehicles.

Since 2006, insurance companies have been required to notify the Department of Motor Vehicles when people cancel their policies or stop making payments. Of 16.8 million vehicles tracked for insurance compliance, the agency has suspended almost 4 million registrations.

About 1.4 million people have restored their registration by buying insurance and paying reinstatement fees, according to the DMV. There is no separate data for Riverside and San Bernardino counties.

That leaves millions of people with suspended registrations who likely continue to drive, along with others who have never had insurance. They face punishment only if they are stopped for a traffic violation and the officer checks their registration.

“It still seems to be falling short of the hope that it would be doing away with the uninsurance problem,” said Sam Sorich, president of the California Association of Insurance Companies.

California had an estimated 3.56 million uninsured drivers as of 2004, the most recent data available from the state Department of Insurance. Almost 94,000 of them were in Riverside County. San Bernardino County had 140,000 uninsured drivers.

Some signs, though, suggest that the state’s uninsurance problem is easing.

In 2005, almost 11 percent of all drivers involved in collisions had no insurance. Of the drivers who were at fault, 15.4 percent lacked insurance, according to the California Highway Patrol.

In 2007, 8.6 percent of drivers in collisions lacked insurance. Of the at-fault drivers, 12.5 percent had no coverage.

“It seems to be going in the right direction,” said Steve Kohler, a CHP spokesman.

DMV officials said they believe the verification program has made it harder for people to skirt the insurance requirement.

“There was definitely a giant gaping hole. There were a lot of people out there just getting insurance to get their vehicles registered,” said Jan Mendoza, a DMV spokeswoman.

California has tried various strategies to reduce the number of uninsured motorists.

People had to start providing proof of insurance to register their vehicles in the early 1990s. Several years later, the state began sponsoring low-cost auto insurance in select counties. The program has expanded statewide under Insurance Commissioner Steve Poizner.

Participation rates remain low, however. The number of low-cost insurance policies from January through November of this year is down a quarter from the same period in 2007, according to the California Automobile Assigned Risk Plan, which oversees the program.

A year ago, Poizner floated a ballot initiative to toughen penalties for driving without auto insurance. Police would remove the front and back license plates from the vehicles of uninsured drivers.

Poizner later dropped the idea. Department spokeswoman Molly DeFrank said last week that Poizner thinks the insurance verification program is working but “we continue to look for ways to further address the issue of uninsured motorists in California.”

Reach Jim Miller at 916-445-9973 or jmiller@PE.com

By Jim Ostroff of Kiplinger

Need more evidence of consumer distress? Auto insurance fraud is up, with consumers resorting to extreme means — torching, drowning or dumping SUVs, pickups and cars — in hopes of getting quick cash from insurance policies.

Once rare, suspect car demolition cases are commandeering investigators, dominating their working hours at state agencies and insurance companies. Nationwide, auto fire insurance claims have jumped by 6% in the past 12 months after years of little change. Indiana, Michigan and New York are hot spots, with burned car claims spiking 13% to 18%, says Dennis Shulkins with State Farm Insurance’s special investigations unit.

The fraud spike is a bellwether of consumers’ economic woes. “Increasingly, people are turning to insurance fraud as a quick bailout for their financial misery, to get out of auto leases they no longer can afford, and to pay off credit card or mortgage debt,” says James Quiggle, a spokesman for the Coalition Against Auto Fraud, a trade group.

High anxiety is driving consumers to rash acts that raise immediate suspicion. Dozens of expensive vehicles were left at water’s edge in Gulfport, Miss., just hours before Hurricane Gustav hit. Scores of cars reported stolen are turning up ditched in Lake Erie and in western deserts. Crime rings are making hay, burning cars for hire in California and smashing cars to smithereens outside the Las Vegas city limits. A New Jersey school principal pleaded guilty to charges he torched a leased auto that had $9,000 in excess mileage fees.

States and insurance companies are wising up to paper-thin ploys. The surge in suspicious automobile destruction claims has prompted New York to put additional resources into this sort of crime. Through October, the state had won 110 court decisions requiring consumers to give up insurance money and ownership of vehicles determined to have been intentionally torched, stolen or sent to chop shops for disposal. That’s up nearly 50% from a year earlier. A helicopter-borne Nevada police task force now prowls the skies to check out suspicious vehicles that are careered into the desert at night to be burned or smashed. Utah, which typically investigates an average of two questionable auto destruction claims a year, already had 30 cases pending by summer’s end.

Bogus car destruction and theft claims eventually sock it to all motorists. “Honest policyholders should be outraged at paying additional premiums as a result of people attempting to commit fraud,” says Shulkins. There are no national statistics on the total value of auto insurance fraud. However, the average policyholder shells out up to $300 a year in higher premiums to help pay for all types of property and casualty fraud.

The Wall Street Journal

Sunday, Jan. 04, 2009

More drivers are letting their car insurance lapse because of the sour economy, putting themselves and others at risk.

Several hundred thousand drivers dropped their insurance in the past year as the jobless rate climbed, estimates a study to be released soon by the Insurance Research Council, an industry-funded group.

Online agency Insurance.com says it also is seeing evidence recently of more uninsured motorists. It says that as many as 40 percent of callers following up on online applications had let their previous policies lapse, up from less than 10 percent a couple years ago.

The trend is bad news for everybody on the road. If you’re hit by an uninsured motorist, you may have to sue to recover costs, and many uninsured motorists have few assets. You can protect yourself by carrying uninsured-motorist coverage — almost half of states require the added coverage — but this may boost your premium.

Even in good times, many Americans drive without insurance. The Insurance Research Council’s previous study, released in 2006, found that nearly 15 percent of drivers nationally were uninsured in 2004, up from about 13 percent in 1999. In some states, including Mississippi, California and Arizona, roughly a quarter of drivers weren’t insured.

Preliminary data from the council’s forthcoming study “indicate that a single percentage point increase in the unemployment rate is associated with a half-point increase in the percentage of uninsured drivers,” said David Corum, council vice president. The nation’s jobless rate was up two percentage points to 6.7 percent in November from a year earlier. The group estimates the number of uninsured motorists based on data from insurance claims.

Possibly adding to the problem is the fact that auto-insurance rates are rising again after a couple of years of flat or declining premiums. Premiums nationally rose 3.8 percent in November from a year ago, according to the Labor Department’s consumer price index.

Agents say a growing number of customers are stripping down their auto-insurance policies, taking the absolute minimum level of liability coverage legally required to drive in their state.

“A good proportion of people on the road are either uninsured or underinsured, and so you have to protect yourself,” said Robert Hartwig, president of the Insurance Information Institute, a nonprofit group. “Your odds of being in an accident with an uninsured driver are substantial.”

Motorists driving without insurance also face risks. In a wreck, they could lose whatever assets they own in a court judgment. Also, driving without insurance is illegal in 48 states and the District of Columbia. The only states that don’t require insurance are New Hampshire and Wisconsin; these states require drivers to show proof of the financial ability to pay damages for liability.

Motorists who allow their policies to lapse for any reason also often must pay an initial 25 percent to 50 percent surcharge for a new policy. Insurance companies charge them more because they consider them irresponsible: Unlicensed and uninsured drivers are disproportionately involved in fatal accidents.

Chicago-based insurance broker Aon Corp. has completed the sale of AIS Management, LLC, which is the parent company of Auto Insurance Specialists, LLC, to Mercury General Corp.
 
Aon said it received $120 million in cash at the closing on Jan. 2, and may receive potential earn out of up to $34.7 million in additional consideration payable over the two year period following the transaction closing date.

AIS is an independent broker and major producer of automobile insurance in California. It reported $400 million of direct premiums written during 2007.

The sale includes business transacted under the Auto Insurance Specialists Inc., PoliSeek and Aon Recreation Insurance brands.

Aon said the sale is consistent with its previously announced plan to shape the firm around risk management and commercial lines insurance brokerage, reinsurance brokerage, and human capital consulting.

Mercury General Corp. and its subsidiaries sell predominantly personal automobile and homeowners insurance through independent producers in several states.

Source: Aon
www.aon.com

NAMIC dailyLead | 01/02/2009

California requires insurers to notify the state’s Department of Motor Vehicles when motorists drop their auto insurance, but millions of drivers are still in noncompliance, facing penalties only if a police officer checks their registration during a traffic stop. “It still seems to be falling short of the hope that it would be doing away with the uninsurance problem,” Sam Sorich, president of the California Association of Insurance Companies, said of the program. Press-Enterprise (Riverside, Calif.), The (free registration) (12/31)

By Hugh Son and Erik Holm

Jan. 7 (Bloomberg) — American International Group Inc., the insurer that renamed its U.S. auto business this week to prepare the operation for potential buyers, may find that unit among the easiest to sell, analysts said.

Zurich Financial Services AG, Allstate Corp. and Travelers Cos. would each benefit from owning New York-based AIG’s 21st Century Insurance, which sells policies over the Internet, said Paul Newsome, an analyst at Sandler O’Neill & Partners. The unit’s name was changed from aigdirect.com, reverting to the brand of a business acquired in 2007.

“Auto insurance is less affected by the current economic crisis than almost any other sector,” said Brian Sullivan, editor of Auto Insurance Report, a weekly industry newsletter. “21st Century is extremely attractive for a buyer that could bolt it onto its own business.”

AIG is selling businesses including life insurance and retirement services in the U.S. and overseas to repay a $60 billion loan that’s part of the government’s rescue package. Rivals selling auto coverage sidestepped the losses that hobbled life insurers, which means more buyers may be able to make bids. 21st Century may sell for about $1.5 billion, said Gary Ransom, an analyst at Fox-Pitt Kelton Cochran Caronia Waller.

Operating income in AIG’s personal-lines division, which gets most of its revenue from auto insurance, rose 86 percent to $52 million in the third quarter on policy sales of about $857 million. Progressive Corp., which relies on auto coverage for 90 percent of its sales to individuals, trades at about 78 percent of 12-month revenue, according to Bloomberg data.

‘Easier to Sell’

21st Century, the eighth-largest insurer of personal autos in the U.S., is cutting 6.6 percent of jobs, according to an October memo to workers. The unit had about 5,500 employees as of September 2007.

“It will be easier to sell 21st Century than it will be AIG’s life businesses that have more exposure to trouble in the financial markets,” said Newsome. “The question is, will it sell for a decent price?”

Zurich’s U.S. home and auto unit, Farmers Group Inc., may pass State Farm Mutual Automobile Insurance Co. to become the largest car insurer in California if the firm buys AIG’s business. The acquisition would also add customers in New Jersey, Florida and Pennsylvania, where AIG has more market share than Farmers, according to 2006 data from the National Association of Insurance Commissioners.

Zurich Chief Executive Officer James Schiro has said he wants to increase sales in the eastern U.S. Sean Kevelighan, a spokesman for Zurich, declined to comment on 21st Century.

‘Great Interest’

“There’s been great interest in our personal-lines business, and we’ve talked to numerous potential buyers,” said David Monfried, an AIG spokesman, declining to name them.

Zurich, Allstate and Travelers sell auto policies mostly through agents. Insurers expect sales through the Internet, the model used by the Geico unit at Warren Buffett’s Berkshire Hathaway Inc., to expand over the next 10 years and need to plan for changes in customer behavior, Travelers CEO Jay Fishman said in an interview in November.

Fishman said 21st Century “will clearly get a lot of interest” and “should be one of the easier ones to sell.” Travelers spokesman Shane Boyd declined to comment.

Allstate’s Rich Halberg said the Northbrook, Illinois-based insurer’s “management has been clear in the past that they will look at acquisitions as one means of growing our business if the terms are favorable,” and declined to comment further.

Stock Slide

Property-casualty insurance stocks dropped 32 percent in the past year through yesterday compared with the 45 percent fall of life insurers, which plummeted on concerns that assets tied to mortgages will decline and the firms will have to compensate annuity customers for stock-market losses. Covering cars has been more profitable than insuring homes in the past five years because of record hurricane damage.

“The majority of property-casualty companies have fared well enough” amid the credit crisis, with exceptions including AIG and Hartford Financial Services Group Inc., said Joyce Sharaf, an analyst at A.M. Best Co., which rates insurers.

The largest deal in the industry last year was the sale of Safeco Corp., an insurer of cars, homes and businesses, to Boston-based Liberty Mutual Group Inc. for more than $6 billion. The Safeco CEO who negotiated the deal, Paula Rosput Reynolds, was hired by AIG in October to oversee the divestiture of its assets to repay its government loan.

Other Sales

AIG, which owned a stake in 21st Century since 1994, acquired in 2007 the remaining 39 percent of shares for about $813 million.

The insurer, which is getting advice from Blackstone Group LP on its asset sales, agreed last month to sell Hartford Steam Boiler to Munich Re for $742 million, about a third less than it paid for the unit in 2000. The buyer will assume $76 million in the unit’s debt, and AIG has received more than $700 million in dividends and other payments from Hartford Steam Boiler since the acquisition, Monfried said.

AIG may not be able to repay its entire government loan unless it gets better prices, said analysts including Cathy Seifert of Standard & Poor’s.

AIG has also secured agreements to sell a stake in an insurance joint venture in Brazil for $820 million. AIG Private Bank, a unit catering to wealthy clients in Asia and the Middle East, struck a deal to be sold to Abu Dhabi-based Aabar Investments PJSC for 307 million Swiss francs ($278 million).

Bad bets tied to home loans brought AIG to the brink of bankruptcy on Sept. 16, when it was bailed out by an $85 billion Federal Reserve loan. The government later boosted the package to about $150 billion.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net; Erik Holm in New York at eholm2@bloomberg.net.

Last Updated: January 7, 2009 14:58 EST

As of January 1, 2009, Law enforcement officials can impound the vehicle of a driver with a blood-alcohol concentration (BAC) of 0.01 or greater if he/she is already on probation for DUI.

A new law will ban California drivers from sending, receiving or reading text messages while driving. This ban includes all text-based communication, including instant messaging and email. Cell phone use while driving is was banned in 2008 in California unless the driver uses a hands-free headset or speaker phone;

The California Department of Motor Vehicles (DMV) states text messaging violations are a $20 fine for the first offense, $50 for each subsequent offense. Emergency personnel who use mobile phones during the line of duty are exempt;

In California a new law will prohibit smoking a pipe, cigar or cigarette in a car while it is occupied by a minor; and

Drivers of fully-enclosed 3-wheel vehicles can now occupy HOV lanes on California highways.

Do auto insurers have capital to pay policyholders? Not by issuig more stock ,which are severaly off their highs right now.   Third-quarter earnings are coming out and the ratings agencies are watching the auto insurance sector closely.  Many auto insurance advertising is based on the insurer’s size and financial stability, so any downgrades could have an impact on gross revenue, as current policy hlders jump ship and look for lower premiums and more stability.

Of course with Ford, GM and Chrysler were downgraded after obvious credit problems, so look to the rating agencies to be the last one on the block to know there are some credit issues.