California Insurance Commissioner Dave Jones said it was too soon to know whether the bill would affect rates, but more drivers will be tested and licensed drivers are more likely to carry insurance.
"One would expect it would translate into lower costs for the insurance companies that should be passed on to the consumers," Jones said.
State officials estimate 1.4 million drivers will apply for licenses under the law.
The legislation will defuse controversies throughout California over unlicensed motorists who are stopped at sobriety checkpoints. Many who are not drunk have their cars impounded because they are unlicensed, said Raney, the president of the police chief's association, which backed the bill.
Hilda Escobar, a Guatemalan woman who said she entered the U.S. illegally in 2003, said getting a license will be a huge relief. Escobar, 45, had to pay $480 when her vehicle was impounded about two years ago in San Diego because she was driving without a license.
"Driving isn't a privilege in California," she said. "It's a necessity."
Spagat reported from San Diego. Associated Press writer Greg Risling in Los Angeles contributed to this report.
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