Friday, August 29, 1997

Commissioner approves lower auto insurance down payments

By RENAE MERLE / Associated Press Writer

AUSTIN (AP) -- Texans who make monthly installment payments on car insurance will get lower down payments and more time to pay balances under a rule approved Thursday by Insurance Commissioner Elton Bomer.

Bomer said expensive down payments and sizable monthly payments contribute to the problem of too many uninsured drivers.

"Working people who live from paycheck to paycheck often must spread their car insurance premiums to fit their budgets," Bomer said.

The rule means that for a $600, six-month policy, the maximum initial down payment would drop to $200 from $240.

"We're thinking for some families this has been a major hurdle and we're making it easier for them," said David Durden, deputy insurance director for property and casualty liens. The insurance department could not provide figures showing how many people chose monthly payments over single payment options.

Consumer advocates and insurance company representatives criticized the rule as ineffective because it could allow for abuse by drivers who buy short-term policies with no intention of paying the balance.

Under the rule that takes effect Jan. 1, insurers may require down payments of up to 16.67 percent of the annual premium for a 12-month policy, and 33.33 percent for a six-month policy. They currently can set the down payments at up to 40 percent on a six-month policy and 25 percent on 12-month policies.

The new rule also requires insurers to spread balances over at least four months for six-month plans and 10 months for yearlong policies. That does not include an additional payment in the last month for renewal.

Balances currently can be collected in three months for six-month policies and eight months for 12-month policies.

Insurance companies will not have to adjust their billing if their installment plans were a better deal than the department's new plan.

D.J. Powers, head of The Center for Economic Justice, said the rule still ignores people who are denied access to insurance. The center has accused major insurance companies of refusing to offer insurance in certain parts of the state, a practice called "redlining."

"Redlining should be the highest priority for the insurance commission," said Powers. "While in theory (the rule) is a good thing, it is not even a Band-Aid for consumers who can't get insurance."

Durden said the new rule was not meant to cure the problem of accessibility to insurance, but address one aspect of it.

"It is really a multifaceted problem," Durden said. "There is no one thing they can do to put insurance in every home."

The Southwestern Insurance Information Service, an industry group, also criticized the rule, contending that it could actually put more uninsured drivers on the road.

"Many people purchase insurance on a short-term basis to comply with the law requiring them to have coverage when renewing their driver's license and getting their car inspected," said Jerry Johns, president of the coalition of insurance companies.

"Under the proposed rule it would be possible for drivers to obtain a proof of insurance card good only for six months by paying only six weeks of premiums."