Good Drivers and Motorists With Low Annual Mileage Will See Benefits of Rules to Increase Impact of Driving Record on Insurance Premiums and Decrease Impact of ZIP Code

Santa Monica, CA — Good drivers throughout California have long been subsidizing bad drivers and those who rack up a lot of miles each year because of an unfair insurance industry system known as ZIP-Code based insurance premiums, in which rates are based primarily on where someone lives regardless of their driving record. Under new rules proposed by Commissioner Garamendi, drivers will first be judged by their driving safety record, the number of miles driven and their years of experience on the road. Under the rules, insurers will still be allowed to consider where a person lives, but the companies will not be able to give ZIP Code the most impact in determining a customer’s premium.

“Insurance companies have punished good drivers in every corner of the state because the insurers discriminate against people in certain ZIP Codes, even when they have perfect records,” said Douglas Heller, Executive Director of The Foundation for Taxpayer and Consumer Rights. “Commissioner Garamendi’s rules implement the common sense approach that your insurance premium should be based mostly on whether or not you are a safe driver. The insurance companies want to keep a system that voters rejected more than 17 years ago.”

Although Californians voted to base auto rates on individuals’ driving records with the 1988 ballot measure Proposition 103, industry stonewalling and a loophole enacted by disgraced former Insurance Commissioner Chuck Quackenbush have allowed that provision of Prop 103 to remain unenforced. Commissioner Garamendi has promised to fix the rules this year.

The data cited by the Farm Bureau in a news release issued today does not reflect what will happen to California drivers when the new rules take effect. Insurance companies acknowledge that there is no study that accurately reflects the impact of the new rules on drivers in the state. For an insurance industry document explaining this point, contact Douglas Heller.

“Insurance companies have used the ZIP Code system to gouge good drivers based on their ZIP Code, even though they’ve never cost the insurer a dime. When the rules are changed to protect good drivers, the insurers will have to rearrange the rates to make sure bad drivers and high-mileage drivers pick up their fair share. Insurance companies will not hike premiums for drivers with good records and risk losing those good customers,” said Heller.

Heller concluded that the Farm Bureau would better serve its members by fighting the insurance companies which are gouging customers across the state.

“Rather than working to help insurance companies maintain a flawed and unfair system, the Farm Bureau should join with consumer advocates and fight the excessive insurance rates charged across the board.”

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