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The "Farmers Insurance News-Alert" website is dedicated to providing the consumer and general public with detailed information concerning the Farmers Insurance Group. This includes fraud reports, consumer complaints, lawsuit's and other legal actions taken against this company. All information contained herein is for educational purposes only. Original sources, when known are sited.

 

California consumers get boost from legislation

California drivers now have more choice when it comes to buying insurance and auto insurance policyholders have more protection when it comes fighting their insurance companies. Gov. Gray Davis signed two bills into law in early October: The first initiates a low-cost auto insurance program in Los Angeles and San Francisco; the second is a law that allows consumers to sue their insurance companies for unfair claims settlement practices. Insurance industry spokespeople are abuzz with concern regarding both laws.

Low-cost insurance in Los Angeles and San Francisco

Uninsured motorists are a nationwide problem, and California will combat it with the Lifeline Pilot Program, a low-cost auto insurance program that will make auto liability insurance affordable for low-income consumers. Drivers can get $10,000 worth of bodily injury liability coverage for one person; $20,000 worth of bodily injury liability coverage for all people; and $3,000 worth of property damage liability coverage. The cost is a flat rate: $410 per year in San Francisco and $450 per year in Los Angeles, but not everyone will qualify.

Consumers in Los Angeles and the San Francisco County whose household income is at or 150 percent below the poverty level qualify for the Lifeline program. (According to the U.S. Census Bureau, the poverty level is $16,036 earned for 2,080 hours worked, or $7.71 per hour.) Slated to begin Jan. 1, 2001, the program has other restrictions, too. In order to get the coverage your car must be worth less than $12,000, you must be at least 19 years old, and you can have no more than one violation on your driving record (either one at-fault accident or one point for a moving violation).

Insurance companies participating in the California Automobile Assigned Risk Plan (CAARP) must also sell insurance under the Lifeline program. Those insurance companies will get a 2.35 percent tax credit on all policies that they sell under the Lifeline program.

The Lifeline program is scheduled to end on Jan. 1, 2004, and has already received criticism from the National Association of Independent Insurers (NAII). Sam Sorich, vice president of the NAII, says that the program is a bad idea. "In general, flat rates are a bad idea because they don't take into account all the complex variables involved [in setting the insurance premium], such as driving records, population density, and type of vehicle driven."

Consumers can go to any insurance agent or contact the CAARP at (415) 765-6767 or toll-free at (800) 622-0954 to apply for coverage under the program.

Insurers are now accountable for bad faith

Under the second new law, insurance companies must deal fairly with third-party claimants — consumers who are wronged or injured by another insurance company's policyholder — and if they don't, they can be hauled into civil court. If, for example, an insurer wrongfully denies a claim or fails to pay a claim in a timely manner, it can be sued in civil court by the claimant. There is no cap on the amount of damages a plaintiff can seek.

In addition, third-party claimants can opt for arbitration if their dispute does not exceed $50,000. But while granting broader protection to consumers, the law has ruffled feathers at the department of insurance.

Commissioner Chuck Quackenbush laments the new law, saying that it serves the interests of a "small cadre of plaintiffs' lawyers," not consumers. Quackenbush also warns that auto insurance rates will rise 10 to 15 percent in the short run as a result of lawsuits arising from this.

The law, known as the Fair Insurance Responsibility Act of 2000, goes into effect on Jan. 1, 2000.

 

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