Car Insurance Rates Downshifting

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Gregg Jones had been with Triple AAA of Northern California for more than 30 years before he decided to shop around for a new auto insurance policy.

"Once you get something in place it’s hard to change. You just get to the point where the (premiums) were becoming a major factor," said the 62-year-old Martinez resident and attorney. So in 2007, he switched from Triple AAA to Mercury Insurance, a move he said has resulted in substantial savings while maintaining the same level of coverage for his late-model BMW. The change resulted in his yearly premium going down about 30 percent, said Jones.

Starting about three years ago, many auto insurers in California have lowered their rates, setting the stage for drivers to shop around.

Fewer accidents, industry competition, a cut back on driving due to higher gas prices and a slowing economy along with a regulatory push are among the reasons for lower rates, observers say.

"We believe the auto insurance market is very competitive and insurers know that people can shop around to find lower rates," said Darrel Ng, a spokesman for the state Department of Insurance, which requires auto insurers to obtain prior approval for rate changes or leaving them unchanged.

Another factor is fewer accidents, due to higher gas prices and a slowing economy, he added.

Proposition 103, the landmark auto insurance reform initiative passed by voters in 1988, has also played a significant role, said Doug Heller, executive director of Consumer Watchdog.

Prop. 103’s best-known provision that insurers base premiums more on motorists’ driving records as opposed to where they live began to be rolled out two years after a long fight between consumer groups and department officials that supported that provision and insurers that fought it.

That provision may result in lower or higher premiums for some drivers but it has not had a significant impact on overall rates sought by insurers, Ng added.

Prop. 103 also requires insurers to go through a departmental review process that requires the companies to justify rates they are seeking so they won’t make excessive profits. With the exception of insurance giant Allstate, the statewide rate reductions among major auto insurers since 2006 was the result of negotiations among the companies, consumer groups and department officials during the review process. Allstate’s rate cut resulted from a departmental hearing after the company initially sought to leave its rates unchanged during a review process.

Auto insurance rates in California were reduced a total of $832.1 million over a two-year period ending in 2008, with about two-thirds of those savings resulting from the review process. Savings are measured as the amount insurers initially sought to collect in rates from all policyholders statewide at the start of the review process and the overall rate amount that was approved.

"So 67 percent of the decrease is due to (departmental) review. However, while we are proud of the work we do here to keep rates fair for consumers, using this as a stat assumes the insurance companies apply for (the) rate change they want as opposed to… working with the department," Ng wrote in an e-mail.

Whatever the case, consumers are benefitting from the lower rates.

"Generally, they are coming down," said Heller. "ZIP codes that historically faced rate discrimination have seen substantial savings. It’s always a good time to shop for insurance because we have a very competitive market."

Still, the decision to buy a new policy should not be tied only to how much it costs.

"It’s good to save money on insurance but if the company is not there for you it’s a waste," Heller said.

When shopping for insurance, consumers should buy a policy that fits their needs, said Tully Lehman, spokesman for the Insurance Information Network of California.

"The first thing to do is to get an understanding of what your current policy is and ask if it is enough to cover you," he said. "If you are in an accident, is the policy level enough to not leave you vulnerable to a lawsuit?"

Under California law, motorists are required to have basic liability insurance, which is $15,000 per person for bodily injury up to $30,000 per incident and $5,000 for property damage. Any additional liability coverage above these amounts, along with uninsured motorist, collision/comprehensive and other coverage will cost more.

In some cases, motorists looking for a new policy may end up getting a different type from what they currently have.

For example, if a teen used to be on the policy but no longer drives the family car, make sure the next policy does not include the teen. For that matter, if the teen is no longer driving the family car, a consumer could also save money by taking him off the current policy, said Lehman.

"That could save you a whole bundle right there," Lehman said.

Also, inquire about discount policies. Many carriers offer lower rates when a consumer has one company for both auto insurance and homeowners or renters insurance.

"Ask your current insurer what the offer and when you are shopping around ask what they offer," Lehman said.

Falling Insurance Rates:

Examples of recent savings per policy (policies can have one or more vehicles). Rate reductions are based on statewide averages and do not apply to all drivers. A motorist’s driving record, type of coverage selected, and other factors will
result in different rates.

GEICO, August 2007: $66 million reduction; 11 percent average decrease resulted
in the average annual policy dropping from $1364 to $1214, or a $150 savings.

AAA of Northern California, October 2007: $100 million rate reduction; 7 percent average decrease, resulted in the average policy dropping from $1514 to $1408, or a $106 savings.

Allstate, March 2008: $245 million, 16 percent average decrease, resulted in the average policy dropping from $775 to $651, or a $124 savings.

State Farm, May 2009: $219 million reduction; 8 percent average decrease resulted in the average annual policy dropping from $825 to $759, or a $66 savings.

Source: CA State Department of Insurance

Low-cost Auto Insurance:

While insurance rates are falling, not everyone can afford a policy at a time when unemployment and foreclosures are rising in California.
The California Low Cost Automobile Insurance Program makes it possible for lower-income drivers with good driving records to obtain basic coverage that meets reduced liability requirements under state law. Premiums are under $400 a
year, with amounts varying by county. Optional coverage is also offered for uninsured motorist coverage and medical payments.
Income levels and other qualifications (a partial summary) listed below are the same statewide.
Household annual income before taxes income cannot exceed 250 percent of the federal poverty level (for example: $27,075 for a single person, $36,425 for two persons and $55,125 for a family of four).
An applicant must be a "good driver" – no more than one at-fault property damage only accident, or one point for a moving violation in the past three years.
An applicant must be at least 19 years of age.
There is a 25 percent surcharge for unmarried males between the ages of 19 and 24.
The vehicle being insured may not be worth more than $20,000.
For more information about the program, go to or call 1-866-602-8861.


Know the length of the policy term. This can be one month, six months (semi-annual) or one year (annual), depending on the insurance company.
Ask about higher deductibles. By requesting higher deductibles on comprehensive and collision coverage, you can lower your costs. However, remember that the deductible you choose is what you are responsible for paying up front in the
event you file a claim against your automobile insurance policy.
Should you drop comprehensive and/or collision coverage on an older car? It may not be cost-effective to have comprehensive or collision coverage on cars worth less than $1,000 because any claim you make would not substantially exceed the annual premium cost and deductible amounts.

Source: CA State Department of Insurance

For more auto insurance tips and information go to the department’s Web site at: or call 1-800-927-4357. Another resource is the Insurance Information Network of California Web site at

Consumer Watchdog
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