Sacramento approves crash tax that could raise car insurance rates

6 Feb, 2011 Insurance News Crash Tax Tax

Last week, Sacramento, California’s city council approved a proposed crash tax that would be imposed on out-of-town drivers who get into accidents in the city.

The state capital’s officials say the proposed fee would fund the local fire department’s resources and would be imposed regardless of fault.

“It is questionable that this ordinance will generate the projected revenue,” Sam Sorich, president of the Association of California Insurance Companies, told Insurance Journal. “Moreover, if insurance policies are required to cover the response fees, consumers will pay the price because insurance costs will increase.”

City officials say the new program could generate as much as $500,000 annually. Under the current rates consumers would be charged $495 for a typical crash and as much as $2,275 if a helicopter is needed.

Given the nation’s uncertain economic condition, it is possible other cities and towns could soon impose their own version of the tax, as many are struggling with fire and police costs.

This means drivers could see potential increases in California auto insurance ratesin the coming years as insurers adjust quotes to cover this cost.

The Insurance News