BestWire

SAN FRANCISCO (BestWire) – (Clarifies information about the California Low Cost Auto Insurance Program in the 11th paragraph.) Consumer groups and several city attorneys have petitioned California Insurance Commissioner John Garamendi to strike down a 7-year-old rule dictating how much weight auto insurers may give to a driver’s ZIP code in their rate-setting and underwriting.

The petition, filed May 28 by Consumers Union in concert with the city attorneys of Oakland, Los Angeles and San Francisco, argues that Proposition 103, passed by California voters in 1988, requires that driving record, miles driven and years of driving experience be granted more weight than any other factors when writing auto policies.

The Southern Christian Leadership Conference of Greater Los Angeles, the Foundation for Taxpayer and Consumer Rights, the National Council of La Raza and the Spanish Speaking Citizens’ Foundation also are parties to the petition.

According to Consumers Union attorney Mark Savage, the group concedes that Prop 103 allows factors such as ZIP code, gender, and marital status to be used in rate setting, but it argues that the law demands that the weight granted to these optional factors be less than the weight of each of the mandatory factors. Under a rule authorized in 1996 by then-commissioner Chuck Quackenbush, insurers are allowed to report only the average weights of optional factors used in rate setting, which Savage said allows them to circumvent restrictions on how heavily they weigh the importance of addresses.

“It’s important to make clear that we are not challenging the court’s decision allowing insurers to use the rating factor for ZIP codes,” Savage said. “This is about bringing the formula in line with its intent, so that those factors are not weighed more heavily than a motorist’s driving record. Where someone lives should not matter more than how good a driver he or she is.”

But not all agreed on what the petitioners’ ultimate goal was. “If you look at those who filed the petition this week, it’s the identical cast of characters who sued to overturn the Quackenbush regulation altogether, and we’re certain that that’s still what they want, in the long run,” said Jerry Davies, a spokesman for the Personal Insurance Federation of California.

In a suit filed against Quackenbush by the Spanish Speaking Citizens’ Foundation, it was argued that the use of ZIP codes in rate setting was a discriminatory practice that constituted “redlining.” The state Superior Court in Oakland initially found for the foundation, but that ruling later was overturned by a state Court of Appeals.

According to Davies, the use of territorial information in auto insurance rates is necessary to provide accurate assessment of costs, and diminishing their use would cause significant harm to consumers. He noted the 3-year-old California Low Cost Auto Insurance Program, which insures several thousand of the state’s poorest drivers, charges higher premiums to Los Angeles motorists than those in San Francisco. According to Davies, the differences in claims and number of vehicles between the two cities make charging different rates necessary, and that even state Senators Martha Escutia and Jackie Speier, who oppose the use of ZIP codes in rate-setting and underwriting, approved of the practice.

“When you have senators like Sen. Escutia, who are certainly not stooges of the insurance industry, review the practice and determine that it is appropriate and is not discriminatory, then I think that speaks for itself,” Davies said.

Garamendi has 30 days to rule on the petition, and Savage said the petitioners expect him to approve it. At that point, the department would likely accept arguments from insurers and other relevant parties and set public hearings for oral comment.
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Contact R.J. Lehmann, associate editor: [email protected]