Monterey County: Farm Bureau Opposes insurance changes
Monterey County Herald (California)
A quiet fight is brewing over likely changes in the way insurance companies calculate auto premiums for Californians.
The changes, opponents say, could sharply increase the rates of Monterey County drivers while motorists in Los Angeles and San Francisco could see their rates drop.
Studies supported by those opponents show that country drivers could see a roughly 15 percent increase in rates.
For a Salinas resident paying $500, for example, a 15 percent increase would bring that total to $575.
But advocates say those studies quoted by opponents are flawed; they are awaiting a new study.
Regardless of the new results, however, they say the shift would finally force the industry to reward good drivers, charge bad drivers more and end rate discrimination.
In December, state Insurance Commissioner John Garamendi announced he is seeking to regulate these companies so they no longer weigh ZIP codes as a heavy factor when deciding auto insurance rates.
Instead, the focus should be on the amount of time a person has been driving, driving record and miles driven, said Garamendi, who is running this year for lieutenant governor.
This isn’t the first time this idea has been floated. In fact, it’s already the law: In 1988, California voters passed Proposition 103, which made these three factors the method of calculating rates.
Other factors like marital status or educational background could be used, but they couldn’t be any more important than the least of the first three determinants.
“But the way (former state Insurance Commissioner Chuck Quackenbush) wrote the regulation allowed some of those factors to count more than the three mandatory factors,” said Norman Williams, state Department of Insurance spokesman.
And of those factors, Williams said, ZIP codes are the most questionable.
“If you live in an urban area and you drive few miles and you have a great driving record and you have been driving 20 years without an accident, you should get a good rate, right?” Williams said. “But because of your ZIP code, you are charged more.”
Garamendi’s proposed change will benefit good drivers and put the burden on bad drivers to pay up, he said.
But that’s not the way some people see it, including the state’s largest farm organization and a coalition of city and county officials.
They say drivers in rural areas, including most of the organization’s membership and Monterey County residents, will bear the burden of rate decreases for urban motorists.
The California Farm Bureau Federation, which represents 87,000 members, released a statement on Wednesday opposing the changes.
“Basically the rural drivers are going to be subsidizing the urban drivers,” said Nancy McDonough, the federation’s general counsel. “(Insurance companies) need to get enough money to cover all their risks. To make money, they’ve got to get that money somewhere else. They are forced to charge less to the urban area. I don’t know how they can avoid (charging more to rural motorists).”
Growers are already contending with higher fuel and worker compensation prices, she said. Higher insurance rates would add yet another cost, further straining their budgets.
“Our concern with this is it’s really an issue of fairness and equity,” McDonough said.
The association has set up a city- and county-specific database on its Web site to show the possible rate changes. The data are based on a study commissioned by the Department of Insurance by actuarial consulting firm Mercer Oliver Wyman.
A call to Mercer Oliver Wyman’s spokesman for an explanation of how the study was conducted was not returned by press time.
Monterey County motorists, according to the database, could see anywhere between a 3 and 29 percent increase in their auto rates. Every city in the county also shows an increase.
Californians Against Higher Insurance Rates, the coalition of city and county officials who oppose the changes, including Salinas mayor Anna Caballero, also point to the Mercer study as well as a study with similar results.
The coalition does not receive any funding, but Sacramento-based public affairs firm Bicker, Castillo & Fairbanks, which is working with the group, was hired by the insurance association trade groups, said partner Kathy Fairbanks, “to go out and let people know what Garamendi is proposing, (to) let people decide for themselves if they want to get involved.”
Fairbanks stressed that city and county officials do not receive money from the insurance association trade groups.
The Mercer study, said Fairbanks, found that the rates of drivers in 52 out of 58 counties would go up and 69 percent of California ZIP codes will see average rate increases.
“The premise is it’s just not fair,” Fairbanks said. “It’s just not fair that drivers in the rural areas should have to pay more than they are paying now.”
But the state Department of Insurance and the Santa Monica-based Foundation for Taxpayer and Consumer Rights, which is advocating Garamendi’s proposed changes, say the numbers are deceptive.
“That’s an incomplete study,” said department spokesman Williams. “We did commission that. When we completed it, the insurance industry itself told us the information was wrong.”
The department has since commissioned another study which is not complete, he said.
“What they don’t acknowledge,” said Doug Heller, executive director of the taxpayer foundation (FTCR), of the Mercer study, “is that these percentages that they claim for Monterey County don’t break out the differences between good drivers and bad drivers. They don’t break down the difference between the retired woman who drives to church on Sunday and the 25-year-old who drives to the Bay Area for work every day.”
Heller’s foundation was founded by Harvey Rosenfeld, author of Proposition 103, and receives its funding from individual donors, private grants and legal work, Heller said.
“The only time we take insurance industry money is when we sue,” he said.
The bottom line with Garamendi’s proposed changes, Heller said, is that Proposition 103 would finally be implemented, making the rate of calculations based on the quality of driving rather than a set of arbitrary factors decided by the insurance industry.
Many insurance companies, he said, charge rural residents higher rates than urban drivers in California in an attempt to attract the urban customers who they think will eventually buy more insurance products.
“If I’m a poor farmer or a low-income citizen,” Heller said, “I’m not the type of customer insurance companies care about. They’ve created this discriminatory scheme to force those people to pay more so the quote-unquote ‘desirable customers’ get a break.”
On Feb. 24, Garamendi will hold a public hearing in San Francisco at the Department of Insurance‘s offices to receive public comment on his proposed regulations.
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Contact the author at: [email protected] or 753-6752.
To see arguments for and against Garamendi’s proposed changes, visit
www.cfbf.com; www.consumerwatchdog.org
What do you think? The Department of Insurance is accepting written comments
about Insurance Commissioner Garamendi’s proposal through Feb. 27.
Letters should be sent to Bryant Henley, California Department of Insurance, 45 Fremont St., 21st Floor, San Francisco 94105 or via e-mail to: [email protected]
