Proposition 33 May--or May Not--be a Solution to California's Uninsured Motorist Epidemic

Wednesday, October 31, 2012

Depending on who is making the argument, Proposition 33 is either a scam or a great idea for lowering the cost of auto insurance in California. In a state that is notorious for having countless uninsured and underinsured motorists, some relief should be forthcoming. But will it emerge?

Even though California law requires auto insurance coverage, some estimates suggest that 40% of all California drivers are either underinsured—they have the bare minimum coverage—or they are completely uninsured. Proposition 33 is on this year’s general election ballot in California and may offer a solution; some believe it offers needed relief while others say it is useless or worse. This is the second time that such a solution has been proposed.  

Under current regulations, a driver gets an insurance discount if they keep their automobile insurance continuously and they stay with their insurance company year after year. Two years ago, voters rejected a version of Prop 33 that would have allowed a similar discount to be applied no matter which insurance company a driver selected. The new version offers nearly the same idea. As long as the driver has insurance, they can get a discount no matter their insurer. The measure lost in 2010. Voters may have believed that it would add costs to the newly insured and would reward good drivers as much as it would bad. Currently, the cost of insurance is mostly determined by risk rather than longevity of insurance coverage.

The discounts to keep drivers continuously insured are not necessarily harmful unless that discount is offset by higher costs on newly insured drivers. Opponents of the measure believe such costs would discourage the uninsured from seeking out coverage. Perhaps this new version of Proposition 33 is not the solution. At least it is a proposal. The status-quo is clearly not ideal.   


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