Farm bureau says state proposal would cost drivers in rural areas more; consumer group backs plan
The Fresno Bee (California)
The California Farm Bureau Federation is rallying its members to oppose new auto insurance rate proposals, saying drivers in rural communities will be unfairly targeted with higher rate increases.
However, the Foundation for Taxpayer and Consumer Rights labeled the bureau’s
attempt to derail the proposal nothing more than scare tactics.
At issue is a recent proposal by state Insurance Commissioner John Garamendi
that would require auto insurers to change the way they calculate insurance rates. The new rules would require insurers to focus less on code or where a person lives and instead base rates primarily on a motorist’s driving record, years of driving experience and miles driven.
The farm bureau said Wednesday that drivers in rural communities such as Buttonwillow and Bradley would see their rates spike between 15 percent to 20 percent while drivers in Beverly Hills would see their rates drop 20 percent under the new rules. The bureau is trying to build momentum on its position as a Feb. 24 public hearing in San Francisco on the proposed regulations nears.
The farm bureau says the proposal will raise auto insurance rates for most Californians. However, motorists in rural communities will be hit even harder.
“Rural drivers with lower average incomes will bear the burden for urban drivers who will gain sharp rate cuts,” said Dave Kranz, spokesman for the California Farm Bureau Federation, the state’s largest farm organization.
The bureau points to a study by the consulting firm Mercer Oliver Wyman, commissioned by the state insurance department. The study sets up three scenarios by which insurers could apply the new regulations and finds that rates would spike most in rural communities, the bureau contends.
The study shows that auto insurance rates would rise in 52 of 58 California counties, the bureau said. The bureau said a more detailed analysis by code shows that rural communities would fare far worse than cities.
Kranz said that in the Fresno County rural town of Five Points, residents could expect to see their rates jump between 8 percent and 18 percent.
“If you look at the overall average rate in Fresno County, they would actually decrease slightly between 1 percent and 2 percent. But, there is a sharp difference based on where you live in Fresno County,” he said.
Residents in the Woodward Park-area code of 93720 would see an increase of about 1 percent to 2 percent, according the information from the farm bureau based on the study.
However, Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights, which supports Garamendi’s proposal, said the study on which the bureau has based its position isn’t conclusive and that even some insurers have taken issue with its findings.
“It’s just not true what they [farm bureau] are saying,” Heller said. “The analysis doesn’t break out what bad drivers and people who drive three times as much as the average driver would pay under the system.”
He also said written comments by State Farm Mutual Automobile Insurance Co., found that the Mercer study offered only a limited snapshot of what would happen. The Jan. 16 comments submitted to Garamendi’s office by State Farm, which Heller provided, said, “There is, therefore, no study from which the impact on California policy holders can be assessed.”
Heller said voters called for the industry to fairly apply insurance rates under Proposition 103 in 1988, and Garamendi has been trying to enact changes while facing industry opposition.
In addition to the Feb. 24 public hearing, written comments on the proposal will be accepted through Feb. 27.
However, the proposed changes are administrative and do not require approval from the Legislature. Garamendi has said he hopes to have the new rules take effect by the end of 2006.
