By Hannah Ohman
On March 23, 2021, the California Department of Insurance (DOI) held a second prenotice public workshop regarding contemplated amendments to expand auto insurance group discounts to lower-income drivers. DOI is responsible for the review and approval of automobile insurance premiums in the state to ensure they are fair and based on objective factors. The second workshop draft text of regulation includes amendments and additions to group insurance plans under Insurance Code section 1861.12 (private passenger auto) and various California Code of Regulations sections.
The Department of Insurance proposed this expansion to group discounts after Commissioner Ricardo Lara ordered an investigation into group discounts in May of 2019. Specifically, Commissioner Lara directed DOI to investigate whether personal automobile affinity group discounts increased the cost of insurance for lower-wage, less-educated consumers. This investigation found that “one-quarter of Californians receive an affinity group premium reduction ranging from 1.5% to 25.9% depending on the insurer and group.” In addition, the data showed that participation in group discount programs decreased with income and education level, with those living in areas with average income above $49,000 more than twice as likely to receive discounts as those in areas with an average income of $22,500 or below. The data showed that in some areas of Los Angeles, San Diego, and the Bay Area, participation in group discount programs in high-income areas was three to four times higher.
The proposed regulatory changes come thirty years after Proposition 103, which outlawed certain forms of insurance discrimination. Proposition 103 permits group discounts to exist, and the Department stated that its changes would ensure that these discounts are offered equally to persons regardless of sex, race, color, religion, ancestry, national origin, disability, medical condition, genetic information, marital status, sexual orientation, primary language, immigration status, occupation, educational attainment, or income level.
On December 23, 2019, DOI released the first draft of the proposed regulations and a subsequent invitation for a public workshop. In a press release dated February 18, 2021, DOI shared the revisions on the second draft. These revisions include requiring insurance companies to offer group discounts to make sure they are available to drivers at different income levels who have similar driving experience, adding an incentive system whereby insurers who excel in writing policies from underserved socio-economic communities will receive a small increased allowance in their expense calculation, and requiring all of an insurer’s available group plans be included in a list of available discounts to every new policyholder at every renewal. These changes are meant to help drivers avail themselves of discounts they may be entitled to but not made aware of presently.
During public comment at the March 23, 2021 workshop, many groups expressed their dissatisfaction with the proposed regulations, stating that the proposed regulations would not accomplish what DOI intends to accomplish (to expand discounts to auto insurance group discounts without adversely affecting those who currently receive discounts), and will instead hurt affinity groups that already receive discounts. An attorney for Consumer Watchdog stressed the need for a change to the existing program because of its adverse impacts on people of color and low-income consumers; in particular, the current state of the group discounts causes racial and economic disparities. Consumer Watchdog also expressed that under current regulations, on average, construction workers pay higher costs than attorneys for auto insurance. Black community leaders expressed their disapproval of the proposed regulations, stating that they would actually eliminate discount programs that help minorities and drive up costs to black communities. These advocates expressed their desire for an expansion of the discount programs to meet the needs of the black community. Multiple insurance companies also opposed the proposed changes.
At the conclusion of the second workshop, the moderator announced there would be a third workshop after Commissioner Lara and DOI review the oral and written comments from the second workshop. Interested parties can track future public workshops and meetings on DOI’s website.