LOS ANGELES (AP) – Fifteen years after California voters approved a ballot measure prohibiting auto insurance rates from being based on ZIP codes, a coalition of community groups filed a petition Thursday calling on state officials to finally make the law a reality.
Consumer and civil rights advocates said voter-approved Proposition 103 had been subverted by a 1996 regulation adopted by former Insurance Commissioner Chuck Quackenbush that allows insurance firms to give more weight to ZIP codes than other factors when pricing premiums.
Insurance Commissioner John Garamendi, who returned in January to the job he first won in 1990, approved the petition within hours. He intends to begin a public hearing process this fall to determine how to proceed.
“This is a serious problem for certain communities in California that face higher costs because of the current regulations,” Garamendi said.
Activists called on insurance firms to rate drivers based on driving records, daily commutes and years behind the wheel. But the insurance industry says some areas – like urban neighborhoods – have a higher incidence of accidents and uninsured motorists.
Pete Morga, a spokesman for the Insurance Information Network, an insurance lobbying group, said basing rates on ZIP codes is reasonable.
“Insurance is a business of assessing risk and pricing it accordingly,” Morga said. “If you live over a fault line, do you think you should pay more? It’s a matter of trying to match risk to the area.”
A survey commissioned by Garamendi’s office during his previous term found there was no clear correlation between losses sustained by insurance carriers and areas where motorists were charged higher premiums by ZIP codes.
“The problem is that nine years have passed and we need to update that information,” Garamendi said. “We need to base our decision on information, facts, statistical analysis as well as a good understanding of how to adjust 103 and fairly distribute the risk.”
A panel of lawyers and civil rights advocates made their case at a news conference in Los Angeles.
“The voters said back in 1988 that insurance premiums should be based on how one drives, not where one lives,” said Mark Savage, senior attorney in the West Coast office of Consumers Union, the organization that publishes Consumer Reports.
As an example, he cited a young male driver with no traffic infractions living in Santa Barbara who pays $1,700 a year for the minimum amount of coverage required by state law. A driver with the same record and automobile would pay $7,800 a year for the same policy in South Los Angeles, Savage said.
The Rev. Norman Johnson, executive director of the Southern Christian Leadership Conference, said the insurance rate disparity “helps widen the gap between the haves and the have nots.”
“Without a vehicle, employment options are limited,” Johnson said. “Without a job, people fall further and further behind.”