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What Is The Continuous Coverage Auto Insurance Discount Act In California?

The Continuous Coverage Auto Insurance Discount Act is gaining some leverage in California as a host of consumer groups have gotten behind the bill. Proponents claim that the act will offer severely improved prices to car insurance customers and offer a strong incentive for uninsured drivers to maintain the minimum amount of coverage. However, opponents of the act claim that it may challenge free market competition in the car insurance industry.

A standard discount offered by car insurance companies is a customer "loyalty" discount. This discount is available to customers who maintain their auto insurance through the same car insurance company for longer than a set period of time. This time period is often several years. It's an incentive for customers to stay to with the same car insurance company. When customers switch to another company, they lose that discount. Under the Continuous Coverage Auto Insurance Discount Act, that type of discount will be offered by all car insurance companies, and will transfer over if a consumer decides to change insurers. The idea behind the bill is that loyalty discounts are unfair if they're not transferable, and they're not as strong of an incentive for a driver to stay insured. The bill will strongly discourage lapses in coverage, as these lapses would invalidate drivers' discounted rates. California has a large amount of uninsured drivers, so hopefully the percentage of uninsured will decrease if the act should pass. More insured drivers could lead to increased competition between insurance companies and less risk for both insured drivers and insurers. This might lower the average price of insurance premiums for drivers in California.

But the bill does not have universal support. Some car insurers claim that the loyalty discount does not stifle competition, and in fact creates competition – any car insurance discount that one company can offer that other auto insurance companies can't is an example of free market competition in action. The agencies contend that such discounts result in lower car insurance premiums and a better market for consumers. Proponents of the bill hold the opposite viewpoint, and believe that premiums will be lower throughout the state of California if car insurance discounts are regulated.

California is not the only state to consider such a bill. Many other states have their own form of the Continuous Coverage Auto Insurance Discount Act. States like Texas, New York and Oregon have had similar legislation in place for years. The bill's supporters hope that successful car insurance regulation programs in those states can be used as a guide to create a better, more fair market for consumers, leading to lower premiums and higher percentages of insured drivers.

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