Health care insurance has dominated the news for the past couple of years now with the debate of whether to make it mandatory to have and whether the government should offer their own. It’s interesting to see individual States attempt to prevent this law from entering their region while the majority of these States actually have laws requiring auto insurance. While people are upset over too worthy federal government regulation, they seem to be oblivious of the fact that auto insurance tends to be one of the most regulated. The appealing part is that this regulation comes from the individual States and not the federal government itself. As auto insurance is regulated by the States, the laws and types of coverage required vary from state to state. California is a state where auto insurance is one of the most heavily regulated.

This is actually a positive since its regulations are very consumer friendly. Having worked in personal auto insurance for the past ten years ranging in positions from customer service rep and underwriter with a top 3 U.S. insurance company, to underwriting manager of a start up insurance company, I have come to the conclusion that while most Californians know they must carry auto insurance, they don’t quite understand all the coverage and what affects their rate. While some of the initial information may already be wildly available on the internet, I don’t feel I have read anything that fully explains the regulations and goes on to advise on how to save money. The following will helpfully aid consumers understand what determines their rates and how to save money when purchasing auto insurance in the State of California.

First and foremost, California auto insurance rates are dependent upon whether you are considered a California good driver. Proposition 103 defines the qualifications for this discount clearly. It is not subject to individual insurance company’s guidelines. All other rating factors are secondary to this one discount. I am attempting to make this as basic as possible without lifeless you all with all the regulations involved, so all I will say is that proposition 103 is the major insurance regulatory law in the State of California. If you meet Prop 103′s definition of a California Good Driver, you are automatically entitled to a 20% discount from an insurance company’s regular rate. Again I must stress that this isn’t an optional discount for an insurance company to give- it is required by law for them to provide. How does a driver qualify for this discount? There are 3 stipulations;

1) The driver must have a minimum of 3 yrs continuous license experience. California unlike other states, does not use a driver’s age, rather how long the driver has actually been licensed to drive. The popular theory that a driver’s rate will drop at age 25 is not necessarily lawful in California. It is possible for a 19 yr old to have a better rate than a 25 yr old. For instance, if a 25 yr old driver recently moved from modern york city where he had no utilize for a license and just obtained one when he got to California, he would be considered having less driving experience than a 19 yr feeble driver who has had a license since age 16 and therefore be subject to a higher rate based on this rating factor alone. Continuous means that the driver has had no lapse in licensing whatsoever- meaning the driver has not had their license suspended, revoked, canceled, or expired during the last three years. Active Military personnel and their dependents are exempt only from the expired portion of this requirement. License experience is based on being licensed in the U.S. or Canada. If the driver has been licensed elsewhere in the world they ma still qualify for the discount if they meet all the definitions and have been licensed in the U.S. or Canada for the last 18 months.

2) The driver may not have more than 1 California DMV point on their driving record within the last three years. The California Department of Motor Vehicles classifies personal auto traffic violations into 0, 1, or 2 points. An example of a 0 point violation would be driving on expired tags, a 1 point violation would be a regular traffic stop such as running a red light, a minor speed (not driving in excess of 100 MPH), or making an illegal turn. 2 point violations are all the major ones- DUI’s, Hit and Runs, Reckless driving, etc… The California DMV will categorize all out of State traffic convictions as either a 0, 1, or 2 point violation. The driver has to be convicted of the traffic violation before an insurance company can charge for it and count it against the California Worthy Driver discount. That is the law. Failure to appear violations, and violations that the driver has not been convicted may not be extinct. As for accidents, they can only be used if the driver was 51% or more at fault and if the total damage was $750 dollars or more. An accident that was at fault where no one was hurt- better yet where an auto insurance company did not payout for injuries- only counts as 1 DMV point. An accident that has injuries counts as 2 DMV points. Please brand that insurance companies normally have their own point system that has nothing to do with the California DMV and whether a driver qualifies for the CA good driver discount. Also please note that an insurance company can charge for 0 DMV point violations even though they don’t count against the driver’s California Good Driver discount eligibility. The driver can have 1 CA DMV point traffic violation or 1 At fault traffic accident resulting in injure of $750 or more and still qualify for the discount. The driver may lose an insurance company’s independent good driver discount, such as a 5 yr good driver discount, as a result of having an at fault accident or traffic violation, therefore seeing an increase in their rate at the renewal, but the insurance company may not remove the California Good Driver discount.

3) The driver may not have a DUI conviction within the last Ten years. California means business when it comes to DUI convictions. If you have been convicted of a DUI you will not be eligible for the California Good driver discount and all the protections it affords (which I will discuss later). It is highly recommended that if the driver has a shot at having his/her DUI violation reduced to a reckless driving conviction, that they pursue it emphatically. How will this help the driver? Even if the driver has to do all the DUI related community service and all the DUI courses, the ten year stipulation does not apply to a reckless (and wet reckless) driving conviction. So instead of not qualifying for the CA good driver discount for ten years, the driver will only lose it for 3 years (depending on when the driver has his license reinstated and has been licensed again for 3 continuous years and if after those 3 years they meet the qualifications). To have the DUI conviction reduced will most likely result in the hiring of a lawyer but the cost of the attorney fees will pale in comparison to not having the CA good driver discount for the full ten years.

By law, an insurance company MUST offer a driver who qualifies for the California Good Driver Discount a policy at a rate of 20% less than their regular rates. Regardless of any other factor including vehicles, whether the driver requires an Certificate of Financial Responsibility filing (SR22), etc…

After determining whether a driver is a California Good Driver, insurance companies must make the following 3 rating factors the major ones in coming up with a rate;

1) The driver’s driving (license) experience

2) The driver’s driving record

3) The total number of miles a driver drives in a year

All other factors including where the driver lives, the driver’s sex, marital status, occupation, the type of vehicle (although not the color) you have, etc… are considered secondary and may not be weighed more heavily than the first three. Also to clarify, an insurance company may still use where the driver lives as a rating factor but it has to be a minor one. The law that was passed and was to be implemented by August 2008, specifies that zip codes can not be used as a primary rate factor only. Please note that while it may seem that an insurance company is calm using zip codes as a major rate factor, the rate increase could have resulted in the update of the driver’s annual mileage. Suppose a driver previously lived in an apartment conclude to work and previously stated to an insurance company they only drove 6,000 miles a year. The driver then advises the insurance company they have moved to a house in a suburb farther away from work. an insurance company will then normally want updated annual mileage for the driver. If the driver then calculates he drives 12,000 miles a year now with the move, the majority of the increase in the premium is a result of the new annual mileage, not because of the driver’s recent zip code (of course this is depending on whether the insurance company is fully complying with the law- we’ll discuss how insurance companies attempt to circumvent this later).

California allows for insurance companies to use occupation as a rating factor and lets insurance companies provide discounts as a result. There are normally two tiers of discounts available and its important to remember not all companies offer an occupation discount. the tiers are usually broken up as such;

Tier I- this includes bankers, Civil/Electrical engineers, Doctors, Lawyers, White collar Managers, Directors, Teachers, Professors, etc.

Tier II- Supervisors (retail or otherwise), nurses, software engineers, underwriters, paralegals, call center service representatives etc..

The remaining occupations- such as bartenders, construction workers, police and firemen, celebrities, bank tellers, secretaries, retail/fast food workers, etc… usually are not entitled to an occupation discount.

Again, its up to the insurance company if it wants to offer this type of discount and what occupations will qualify for it, this is just a general list.

Females still receive lower rates than males, and married individuals (including same sex registered domestic partners) receive lower rates than single ones.

Vehicles may alter a rate depending on the coverage a driver chooses to carry and coverage will be discussed in fragment II.

Also discussed in part II will be the strict regulations an insurance company must adhere too when attempting to cancel or non renewal a policy holder.

Part III will provide tips on how to place money when shopping for auto insurance in California.