Proposition 103 (Section 1861.01 (a) of the California Insurance Code (CIC)), enacted in 1988, set current state law regarding automobile insurance rates and premiums for insurance policies. Rates and premiums are determined by the insured's driving record, the number of miles driven every year, and the number of years of the insured's driving experience. Under the law, the Insurance Commissioner can adopt additional factors that relate to the risk of an insurer having to pay claims for a loss suffered by an insured person. One of these factors is "persistency", which establishes the right of an insurer to reward long-term customers with discounts and other bonuses. New customers are barred from any persistency discount. The law also bars insurance companies assigning rates and premiums based on whether a customer did not previously have automobile insurance. Prop. 103 also established the requirement of all insurance companies in the state to pay an insurance premium tax instead of a corporate income tax. The tax is based on the amount of insurance premiums the insurer earned in the state each year for automobile insurance as well as other kinds of insurance.
Proposition 17, or The Continuous Coverage Auto Insurance Discount Act (09-0028), appears on the June 8, 2010 ballot. The act would amend Prop. 103 to authorize insurance companies to offer persistency discounts to new customers who have had insurance coverage in the past but with a different insurance company. Customers would be eligible as long as their coverage had not lapsed for more than 90 days in the last five years. Customers who had lapsed coverage due to military service in another country would also be eligible. Minors who live with a parent could qualify for the discount based on the their parent's eligibility. California's Legislative Analyst estimates that the net impact on state premium tax revenues from Proposition 17 would probably not be significant.
