Defective Quackenbush Regulations Permit Insurers to Continue to Base Rates Primarily on Where Motorists Live Rather than on How Well They Drive
Over twelve years after California voters passed Proposition 103 in 1988, the provision of that initiative requiring automobile insurance premiums to be primarily based on how people drive, rather than where they live has yet to be enforced. Yesterday, the Proposition 103 Enforcement Project, a project of Santa Monica-based, Foundation for Taxpayer and Consumer Rights filed a petition with the California Supreme Court urging the court to strike down a defective Quackenbush regulation that allows insurers to continue to use ZIP Code as the primary determinant of auto insurance premiums.
“It is now in the hands of the highest court in the state to finally implement the will of the voters: that auto insurance rates be based primarily on your driving history, rather than where you garage your car,” stated Pam Pressley, FTCR staff attorney. “Quackenbush may have left the state, but his legacy lives on. His regulations give insurers the ability to ignore the law and unfairly penalize certain good drivers by charging higher premiums just because of the neighborhood in which they live.
While all motorists suffer from territorial rating, this pernicious practice particularly harms residents of urban areas. According to California Department of Insurance data, territorial rating has resulted in dramatically differing premiums for people living in different zip codes. Compounding the damage for low-income families caused by territorial rating are the mandatory insurance law and Quackenbush‘s Proposition 213, which punishes innocent accident victims who do not have insurance.
Example– A woman with 25-27 years driving experience and a perfect driving record who drives 13,000 miles per year will pay a premium of:
$772 to Progressive West Insurance Co. if she lives in Pacoima (91331 — CDI underserved community)
$281 to Progressive West Insurance Co. if she lives in San Luis Obispo (93401)
Her zip code accounts for 63% of her premium.
On December 29, 2000, the First District Court of Appeal upheld regulations allowing insurers to continue their discriminatory ZIP-Code rating practices. In 1996, Insurance Commissioner Quackenbush issued the regulations which allowed insurers to evade the requirement of Proposition 103 which requires premiums to be based primarily on how one drives rather than on where one lives. FTCR’s Prop 103 Enforcement Project and other citizen groups challenged the regulations and won at the Superior Court. The insurers and Quackenbush appealed. The Court of Appeal ruled in favor of the Department of Insurance and the insurers, upholding the defective Quackenbush regulation. After the petition filed yesterday by consumer groups, the California Supreme Court will have 60 days to take the case.