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California Proposition 100, "Good Driver" Insurance Discounts (1988)

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California Proposition 100, or the Insurance Reform and Consumer Protection Act of 1988, was on the November 8, 1988 statewide ballot in California as an initiated state statute where it was defeated.
  • Yes: 3,849,572 (40.9%)
  • No: 5,562,483 (59.1%) Defeatedd

Proposition 100, if it had passed, would have required insurance companies to reduce motor vehicle insurance rates for drivers defined as "good drivers." It also would have made other changes related to motor vehicle insurance, such as affirming the "at-fault" system then in effect in California, restricting the implemention of "no-fault" insurance. It also would have prohibited the government from setting the rates of attorneys involved in vehicle accident work.

Proposition 100 was supported by Mothers Against Drunk Driving, the Congress of California Seniors, Common Cause, the League of California Cities and John van Kamp, who was at the time the Attorney General of California. It was opposed by the California Farm Federation and a former chair of the California Democratic Party.

Proposition 100 was one of four insurance-related measures on the 1988 ballot in California. The far-reaching Proposition 103 is the only insurance proposition that was approved. It bested Proposition 100, Proposition 101 and Proposition 104.

Ballot summary

The official ballot summary said, "Provides minimum 20 percent reduction in certain rates for good drivers from January 1, 1988, levels. Requires companies insure any good driver in counties where company sells automobile insurance. Requires ongoing minimum 20 percent good-driver differential. Funds automobile insurance fraud investigations, prosecutions. Provides consumers comparative automobile insurance prices. Applies laws prohibiting discrimination, price-fixing, and unfair practices to insurance companies. Requires hearing, Insurance Commissioner approval for automobile, other property/casualty, health insurance rate changes. Establishes Insurance Consumer Advocate. Increases enforcement, penalties for fraudulent health insurance sales to seniors. Cancels conflicting provisions of Propositions 101, 104, and 106 including attorney contingent fee limits and prohibits future laws setting attorney fees unless approved by voters or Legislature. Authorizes insurance activities by banks. Summary of Legislative Analyst's estimate of net state and local government fiscal impact: Would increase state administrative costs by $8 million for Department of Insurance and $2 million for Department of Justice in 1988-89, varying thereafter with workload, to be paid by additional fees on the insurance industry. Would increase costs for Department of Motor Vehicles by $100,000. Would reduce state revenues from the gross premiums tax by about $20 million in first year if no other changes are made in insurance rates. Would increase revenues for Department of Insurance by over $500,000 annually from fees paid by insurance companies for fraud investigations."

Lawsuits

  • 20th Century Ins. Co. v. Garamendi. 8 Cal. 4th 416, 878 P.2d 566, 32 Cal.Rptr. 2d 807 (1994).
  • Calfarm Ins. Co. v. Deukmejian. 48 Cal. 3d 805, 771 P.2d 1247, 258 Cal. Rptr. 161 (1989).
  • Sanford v. Garamendi. 233 Cal. App. 3d 1109, 284 Cal. Rptr. 897 (1991). "The repeal of California’s prohibition on banks being licensed as insurance agents or brokers was intended to allow banks to be licensed as insurance agents and brokers even though the repeal did not expressly grant banks the power to do so."[1]
  • Lee v. Travelers Cos.. 205 Cal. App. 3d 691 (1988). "However, delay in claims handling or the denial of claims does not rise to a sufficient level of outrageous conduct which can support a cause of action for intentional infliction of emotional distress."[2]

Fiscal impact

The fiscal estimate provided by the California Legislative Analyst's Office said:

Costs

Departments of Insurance and Justice. This measure appropriates $10 million from the Insurance Fund to pay for the administrative costs of its provisions in 1988-89. Of the amount appropriated, $8 million is for the Department of Insurance and $2 million is for the Department of Justice. The Insurance Fund is supported by fees and assessments on the insurance industry. Given the current balance in this fund, fees and assessments would have to be increased to cover these additional administrative costs.

In the years following, the ongoing costs could be somewhat lower or higher, depending on workload.

Department of Motor Vehicles (DMV). The Department of Motor Vehicles would incur annual costs of about $100,000 to include notices regarding the availability of information on automobile insurance prices in its annual renewal mailings.

Revenues

Insurance companies pay a tax based on the amount of gross premiums they receive each year from insurance sold in California. These tax revenues are deposited in the State General Fund.

This measure requires insurance companies to grant a good driver discount. It also requires the Department of Insurance to review certain proposed insurance rate changes. Information from the DMV indicates that over half of the drivers in California could quality for the good driver discount. Such discounts, by themselves, would reduce state insurance tax revenues by about $20 million in the first year they are granted. This estimate assumes that no offsetting adjustments would be made in other insurance rates to compensate for this discount. Whether such adjustments would occur is unknown.

The ongoing revenue impact of this measure also is unknown. It would depend upon what happens to insurance rates in the future.

Department of Insurance. The Department of Insurance would receive unknown revenues, possibly over $500,000 annually, from fees paid by insurance companies on automobile policies. These revenues would be used to fund increased insurance fraud investigations.

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