CA Department of Insurance Proposes Major Change on Auto Insurance Group Discounts

The California Department of Insurance has recently proposed a major correction on auto insurance group discounts. The proposed regulations will reform how insurers offer group discounts whether it be based on profession, education, or any other random factor.   If approved, it will be the first major change to the ‘affinity group’ discounts since 1988 – also affecting other insurance discount regulations such as homeowners’ insurance.

The CA Department of insurance had drafted the new regulations after Insurance Commissioner Ricardo Lara had requested an investigation of the group discounts. Data from the investigation shows that participation in group discounts is less based on education level and income. Zip Codes with a typical income of $49,000 or more are twice as likely to receive discounts than those with an average income of $22,500 or less.

There is still a major concern that the proposed corrections will eliminate the discount auto insurance program used by many people in California who struggle as prices keep rising.  The new regulations need to be carefully reviewed to better determine how they will impact insurees. At present, many hard-working Californians save money on auto insurance thanks to these programs.

The investigation conducted by the CDI found out that group discounts were effectively used, but mostly on higher-income occupations who were given a fast pass while lower-income motorists and individuals of certain races weren’t given the same discount benefit. Thirty years ago, ‘redlining’ practices were banned – if you were poor you basically paid more on car insurance. But we are facing similar issues again. The new discounts are great if they are non-discriminatory as intended by voters. Proposition 103 had established the required factors to be the driving record, miles driven, driving experience by years, and other optional factors none of which are discriminatory.

Here are other key findings:

  • Drivers in affinity groups reside in ZIP Codes with a predominantly white population.
  • Three-quarters of motorists residing in underserved communities aren’t in an affinity group while the rest of California is at 57%.
  • People in affinity groups reside in ZIP Codes with higher education with an average of 28% in areas with fewer college degrees and 56% live in areas where half or more have college degrees.

A workshop will be held on Jan. 28, 2020 to provide the affected or interested stakeholders an opportunity to express their comments regarding the proposed regulation changes. The CDI proposed regulations that all groups notwithstanding their occupation, sex, ancestry, religion, disability, marital status, immigration status, income level, and national origin, are offered discounts on an equal basis and exclusively considering the already established factors.

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