Santa Monica — Insurance companies sell only 6% of their automobile policies in California’s poor communities, even though 13% of the state’s registered vehicles are in those “underserved” communities, according to a study issued by the California Department of Insurance last week. The study is the first comprehensive assessment of insurers’ unfair discrimination practices undertaken by Insurance Commissioner Quackenbush. The study illustrates the problem with the insurance industry practice of using zip code as a prominent factor in determining rates of insurance policies, known commonly as “redlining,” which is illegal under Proposition 103.
Consumer advocates with the Foundation for Taxpayer and Consumer Rights (FTCR) consider the Department of Insurance data powerful documentation that the state should require insurers to sell a low-cost insurance policy to low-income Californians. SB 171 (Sen. Escutia–Montebello) would create a $300 liability policy known as the Lifeline Automobile Insurance Plan, to be sold by all insurers in the state. The policy, which was developed by actuaries working with FTCR, would be available only to good drivers (approximately 87% of presently uninsured motorists would qualify).
“The Commissioner’s data points directly to the need for Senator Escutia’s low-cost auto insurance legislation,” said Doug Heller, consumer advocate with FTCR. “Since insurance companies refuse to sell affordable insurance in low-income communities, California’s legislators should require it. The Commissioner’s report is the best argument for the Lifeline Auto Insurance Plan.”
Commissioner’s Regulations Reinforce Problem, Advocates Charge
In a case brought last year by FTCR’s Proposition 103 Enforcement Project, a California Superior Court recently ruled against Insurance Commissioner Chuck Quackenbush, requiring the Commissioner to rewrite regulations so insurers do not unfairly overcharge motorists according to where they live. Commissioner Quackenbush has appealed the ruling.
“It is hypocritical that Commissioner Quackenbush is expressing concern for the plight of the underserved while at the same time he is trying to block a court decision which requires him to address redlining,” said Heller. “His own regulations enshrine the inequities that his new report has found. Commissioner Quackenbush should withdraw his appeal of the Superior Court decision in light of this report and force insurers to comply with California law.”