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Paul Zimmerman
pzimmerman@mrllp.com
310.299.5500

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New Hurdles for Insurers Offering Good Driver Discounts

It is no newsflash that qualified good drivers must be offered premium discounts for automobile insurance under Proposition 103. That being said, the mechanics of these offerings have recently become more complicated. An explanation follows, but first, a bit of background.

Companies having multiple comparable auto insurance programs are required to offer good drivers – both at the inception of coverage and then, at each renewal – the lowest premiums of all the programs for which they qualify. Historically, the California Department of Insurance has allowed insurers to satisfy this obligation by including a general notice in each application or with policy documents revealing that lower premium options may be available, along with instructions for insureds to check with their companies or agents for information.

But things have changed. At the Association of Insurance Compliance Professionals (AICP) Western Chapter Education Day back in May, a senior CDI representative announced the Department’s decision that such a notice will no longer be acceptable. Instead, going forward insurers will be required to specifically determine at each renewal whether a lower rate might be available for any given insured. There is more. Insurers must then provide customers with a description of their product choices (including pricing) so that informed purchasing decisions can be made.

No doubt, implementation of this new requirement could prove to be an administrative nightmare, though the CDI believes that advancements in technology should reduce the cost of determining the lowest rates available to insureds at renewal. The Department has elected (as of this writing ) not to issue a bulletin about the change, relying instead on staff presentations and word of mouth to publicize the revised notification requirements.

Insurers should expect Department examiners to begin evaluating insurer compliance relatively soon. Although little guidance has been provided in this regard, insurers should anticipate that they could be cited if examiners determine that other lower priced options were available for insureds at renewal that were not set forth in detail with offers of insurance.

Of course, in the absence of a relevant bulletin, insurers should not hesitate to contact us with any questions or concerns about this issue (though they should do so sooner rather than later, and certainly before any report is prepared in the event of an examination). Given our understanding of the CDIs position on the matter and close relationship with Department examiners and senior staff, we are well positioned to provide advice and counsel.

The insurance regulatory team at Michelman & Robinson, LLP can be reached at (310) 299-5500, dhauge@mrllp.com or kmccain@mrllp.com.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.