P&CCaliforniamedium
An insurer issues a private passenger auto policy to a California 'good driver' as defined by Ins. Code § 1861.02. The insurer's standard rate for the risk profile (with no good-driver status) would be $1,000. What is the maximum premium the insurer may charge this good driver?
A$1,000 — the good-driver designation by itself confers no entitlement to any mandatory premium discount in California
B$900 — the statute guarantees a discount of at least 10% below the standard rate for a qualifying good driver
$800 — at least 20% below the rate charged to a non-good-driver in the same risk category
D$750 — the statute requires a discount of at least 25% below the otherwise applicable standard rate
Why this is the answer
Ins. Code § 1861.02 entitles any motorist who meets the statutory 'good driver' definition (continuously licensed for the past three years, not more than one point on the DMV record, no felony Veh. Code conviction, and not at fault in a fatality) to purchase a Good Driver Discount policy at a rate at least 20% below the rate the insurer would otherwise charge the same applicant for the same coverage. The discount is mandatory — every admitted insurer that writes auto in California must offer it. On a $1,000 base rate the maximum chargeable premium is $800. See Ins. Code § 1861.02.
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