Since Proposition 103 was passed in California, in 1988, car insurance rates started going down, while on a national level, car insurance costs have increased by 43 percent during this period. Prop. 103 was enacted in large part thanks to consumer advocates, who were urged by car owners to do something about the extremely high insurance premiums that they had to pay at that time.
Auto insurance in California became mandatory in 1984, and insurance companies started raising their rates significantly, immediately after the law went into effect. This put an additional strain on all car owners’ budgets, so advocates proposed a measure which would prohibit insurance companies from further increasing their rates without getting an approval from the state’s Department of Insurance.
Proposition 103 was supported by 51% of California voters, and as soon as it went into effect, insurance companies had to roll back their rates by 20%, and it prohibited all companies from raising the rates until November 8, 1989. Additionally, drivers who had clean driving records received a 20% discount on car insurance. These changes to the car insurance regulations were not received with delight by insurance companies, which spent a lot of money and time in efforts to defeat the proposition. According to some estimates, companies spent $80 million lobbying against the law, but without success.
In addition to the reduced rates, Prop. 103 introduced certain reforms to the way companies determine their insurance rates. Under these reforms, when setting rates, insurers had to take into account the following factors: a driver’s safety record, the number of miles driven annually, and the driver’s years of experience.
The effects of Prop. 103 were amazing, from both a financial and legal point of view. It has helped car owners in California save $100 billion on auto insurance since 1988, or an average annual savings of $345 per household, according to a report by the Consumer Federation of America.
Other states haven’t followed suit, mostly because of the strong opposition from insurance companies and other lobby groups. If all states were to enact this type of regulation, Americans would save over $350 billion over the next 10 years, according to the research conducted by the Consumer Federation of America.