Pasadena Star-News (California)

Some motorists could see drops in their auto insurance premiums, thanks to an Automobile Club of Southern California decision to base policy costs on driving records instead of ZIP codes — a policy required by Proposition 103‘s passage almost 18 years ago.

The proposition has never been enforced.

“Across the state, certainly across the county, you see rate disparities from one ZIP code to the next that are so extreme as to be almost unbelievable,” said Douglas Heller, executive director of the Foundation for Taxpayer and Consumer Rights, a Santa Monica-based consumer advocacy group that wrote the proposition.

“All drivers should be judged on how they drive, not where they live,” he said. “We think that this sets the ball rolling for other insurance companies.”

State Insurance Commissioner John Garamendi hailed the Automobile Club’s move as a step toward implementing the rate rollbacks California voters demanded when they approved Proposition 103 in 1988. The proposition called for insurance rates to be based largely on drivers’ safety records.

“Thanks to the Auto Club‘s action, nearly 1 million drivers will realize that wish, along with an average annual decrease in their premiums of $134,” Garamendi said.

But according to Rich Halberg, a spokesman for the Allstate Insurance Company, adopting the new policy would increase insurance costs for 60percent of customers, mostly those living outside big cities.

Twelve percent of the Automobile Club’s good drivers will see increases, said company spokeswoman Alice Bisno, due in part to an additional, across-the-board rate reduction of 7 percent.

The Automobile Club’s rival insurance companies have opposed Garamendi’s proposed regulations that would require them to adopt similar methods of determining rates.

Using ZIP codes to determine insurance costs makes sense, Halberg said, because some parts of the state are more dangerous to drive in.

“There is a lot more chance of getting into an accident driving two miles on the 210, than two miles out by El Centro,” he said.

The Automobile Club, the state’s fourth-largest auto insurance provider, plans to have the new rates in place starting Dec. 1, Bisno said. Garamendi said he hopes the move will prompt the Automobile Club’s competitors to follow suit.

Harvey Rosenfield, the author of Proposition 103 and the founder of the Foundation for Taxpayer and Consumer Rights, called the Automobile Club’s decision “a historic moment for all California motorists.”

“Auto Club has demonstrated extraordinary leadership, embraced change and made a commitment to Southern California by deciding to implement Commissioner Garamendi’s good driver regulations ahead of schedule,” Rosenfield said. “The Auto Club‘s decision sets a standard for fairness in the marketplace that should be emulated by other insurers.”

Would Auto Club rival State Farm Insurance — California’s largest auto insurer — consider basing its policy costs on driving records rather than ZIP codes?

Not likely, according to company representative Eddie Martinez.

“We don’t see that trend happening,” he said. “That’s really all that I can say.”

Tully Lehman, a spokesman for the nonprofit Insurance Information Network of California, said other insurers will be paying close attention to the Auto Club‘s move, however.

“If one company believes they can make this work, the others will watch to see what happens,” he said. “But these other companies obviously have their own books of business and their own way of doing things.”

Tully also pointed out that territorial ratings do reflect the crime rates and driving climate of various regions.

“They are very different in terms of death rates, accidents and lawsuits,” he said.

Tully said some insurance companies don’t place as heavy an emphasis on ZIP codes as other companies because their customer base might be largely rural.

But other companies with a heavier concentration of urban customers will probably continue to place more significance on ZIP codes, Tully said.
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Staff Writer Kevin Smith and City News Service contributed to this story.