In an effort to extend group discounts for auto insurance to lower-income drivers, blue-collar workers and motorists of color, California has issued revised draft regulations following a two-year study that found group discounts disproportionately benefit wealthier and more highly educated Californians when it comes to auto rates, according to the California Department of Insurance.
The move would be the first major reform to group discounts since California voters approved Proposition 103 in 1988, the department reported. The revisions include:
- Reducing barriers to the creation of new groups for lower-income drivers. The revised draft regulations require that insurance companies 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 were improved by adding an incentive system whereby insurers that excel in writing policyholders from underserved socioeconomic 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.
While around 25% of California drivers receive a group premium discount, ranging from 1.5% to 25.9%, the study found that participation in these types of group programs decreases with declines in income and education levels.
Drivers in ZIP codes with average per capita income above $49,000 are twice as likely to receive discounts as those in ZIPs with average per capita income of $22,500 or below, according to the California Department of Insurance, which notes in some high-income districts, participation can be three to four times higher.
“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,” Insurance Commissioner Ricardo Lara said in a release. “Whether you’re a doctor or a janitor with comparably safe driving records, you should have the same access to these discounts.”
Proposition 103, which mandated insurance prices be based on how a person drives, also allowed...