Contra Costa Times
OAKLAND – Sam Foxx lives in the 94609 ZIP code, on the wrong side of Broadway. If he moved just a few blocks east, into the more affluent 94611 ZIP code, he would pay substantially less to insure his Toyota pickup and small recreational vehicle.
“It annoys the snot out of me,” Foxx, 50, said. “I would prefer that they went on my driving record than on where I live.”
The city attorneys of Oakland, San Francisco and Los Angeles and consumer groups agree. They have mounted a campaign to change the way insurance companies calculate car insurance rates. Last May, they petitioned state Insurance Commissioner John Garamendi to require insurance companies to base rates primarily on driving record, miles driven and years of driving experience.
In 1988, California voters, angry over soaring insurance rates, passed Proposition 103, which ordered insurance companies to use those three factors to determine premiums with other factors such as ZIP code, marital status and gender given less weight. But in 1996, then Insurance Commissioner Chuck Quackenbush introduced a regulation that allowed insurance companies to continue to base rates on where people live.
Now, “ratepayers in low-income areas throughout California are still being sandbagged with exorbitant rates based not on how they drive but on where they live,” said Oakland City Attorney John Russo.
Garamendi, who held a public hearing Thursday night in Oakland on the issue, said he plans to rewrite Quackenbush‘s regulation because it gives more weight to ZIP codes than is allowed under Proposition 103. He compared the practice of basing insurance rates on ZIP codes to redlining, saying it “appears to be discriminatory” because it unfairly penalizes low-income and minority drivers.
Insurance companies, who took this issue to the California Supreme Court in March 2001 and won, say they review the number and cost of claims filed in a given area to tabulate rates. Urban dwellers pay higher rates because of increased traffic congestion, thefts, accidents and higher medical and car repair costs.
“Insurance is all about discrimination. It’s all about discriminating between different risks,” said Jeff Fuller, general counsel of the Association of California Insurance Companies, an industry trade group. “We do not discriminate on the basis of race, wealth, national origin.”
If insurance companies are forced to change the way they determine rates, more than 60 percent of California drivers who live in suburban and rural areas will pay higher rates to give a break to drivers in urban centers where accidents are more frequent and expensive, said Jerry Davies, spokesman for the Personal Insurance Federation, another industry trade group. A study that the industry groups commissioned estimates that 56 percent of drivers with traffic violations on their records would see their rates decrease.
According to the study, drivers in Contra Costa County would pay 6 percent more while drivers in Alameda County would pay 3 percent more. Drivers in San Francisco would get a 12 percent decrease in their premiums.
Not true, said Russo, who says insurance companies hire legions of lobbyists and lawyers to convince people that their rates will increase. The bottom line, he says, is that insurance companies don’t want to write policies to low-income drivers.
Harvey Rosenfeld said insurance companies are circumventing Proposition 103, the insurance reform measure he authored. He stood on the “right” side of Broadway at the corner of 41st Street on Thursday morning to show how ZIP codes influence insurance rates. If that same female driver lived in the ZIP code that includes the more affluent Piedmont and Montclair, she would pay $427, or 30 percent, less for insurance than on the other side of Broadway, he said.
“You are always going to be able to find a boundary line across which a person has to pay a higher rate,” said industry lobbyist Janine Gibford. “But statistically there is no system that is more valid than territorial rating.”
That doesn’t wash with Brendan Mulholland, a 40-year-old geologist who three years ago bought a 109-year-old Queen Anne cottage in the Fruitvale neighborhood of Oakland. Mulholland is one of those people who lives on the wrong side of one of those boundary lines. He says he gets discounts on his insurance for a clean driving record, the number of years he has been driving and having multiple cars insured.
But if he moved two blocks away, into another ZIP code, he could shave 20 percent from his annual premium. “The whole premise of basing auto insurance premiums on locality as opposed to individuality is wrong,” he said.
Jessica Guynn covers technology. Reach her at 925-952-2671 or [email protected]