InsureMe Agent Blog: Low-income Auto Insurance: Beneficial or Bad News Bears?

Yesterday, P&C blog IndemniBlog posted on California's plans to expand its state-run auto insurance plans to provide coverage for low-income drivers.

The gist:

Qualifying households (that fall within 250 percent of the poverty line and include a driver with no more than one point on their driving record) can receive coverage, that by the way, falls below the California's minimums. Under the low-income plan, drivers would receive $10,000 in bodily injury coverage per person, $20,000 per accident and a mere $3,000 for property damage.

While the objective of the program is to provide the state's 3 million uninsured drivers with affordable coverage, the host of IndemniBlog feels the state is doing a disservice to its residents by offering the program, mostly due to the extremely low coverage amounts.

"Any agent that is advocating these levels of liability coverage does not have the best interest of their insured's at heart," says IndemniBlog.

The blog also points out that the designated $3,000 for property damage is a joke:

"[...] You're fooling yourself if you think that $3,000 can adequately cover damage to a vehicle you hit! A bare bones Honda Civic costs more than four times the limit of liability you are being insured for."

Personally, I have mixed reactions about the plan.

I agree with the folks at IndemniBlog regarding the coverage limits, but on the other hand, even a couple thousand dollars is better than having no coverage at all, right? Not to mention it'll get more motorists to drive legally (IndemniBlog's source, the San Jose Mercury News, reports that thousands of drivers in San Francisco and LA sign up for the plan during a six-year test period).

Alternatively, however, I do think there's a danger in offering auto insurance at these low levels. My guess is, a lot of folks would decrease the amount of coverage they carry if they knew they could do so. And I hardly think driving underinsured should be promoted by the state.

But because I don't like to sit on the fence about anything, I'm going to say that I don't think the plan is a horrible idea. It'll encourage some drivers to get coverage because they know they can afford it, which may ultimately decrease insurance costs for insured drivers. That said, it's definitely not a cure-all for California's uninsured motorist problem. But what is?

Take a look at the IndemniBlog post over the weekend and come back to the InsureMe Agent Blog with your thoughts on Monday. There will be a quiz.

Alright, there won't be, but I hope you all have opinions and ideas to share.

Have a great weekend!