Proposition 17 looks like it will open up cheap California Auto Insurance for many motorists as but there is a small catch. Isn't there always?
An analysis of the report says, “A basic principle of insurance rate-making,” is that “every discount requires a corresponding surcharge so that every factor influencing a rate will balance evenly over an insurer’s book of business.”
In other words, not everyone will benefit. Consumer Watchdog goes further and says that Proposition 17 wouldn't result in a cheap California auto insurance for anyone.
However, supporters of the proposal including the Alliance of Insurance Agents and Brokers, say most motorists would benefit from the change because it would promote increased competition.
What Proposition 17 wishes to change the factors upon which California auto insurance rates can be based under the current basic rate-making formula.
The current laws state that rates can be based only on miles driven, the number of years a driver has been licensed and the safety record of the driver.
Subsequently, California Auto insurance regulators have added 16 additional optional factors, including what is called a persistency discount. This means an insurance company can offer discounts as loyalty rewards to long-time customers.
Proposition 17 would change the law to allow competitors to offer the same kind of discount to motorists who switch to cheap California auto insurance companies, as long as they have continuously purchased auto insurance over the previous five years without an interruption of more than 90 days.
Those who had a break in coverage for any period of time as a result of failure to pay a premium would not be eligible.
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