Insurance rates face scrutiny

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ZIP codes often determine how much drivers pay

The San Francisco Chronicle

Consumer groups are seeking to tighten a loophole in a state regulation that allows car insurers to charge higher rates to customers based on where they live instead of how they drive.

Thus far, they have the ear of state Insurance Commissioner John Garamendi, who is hosting a series of town hall meetings to discuss the matter.

“I’ve certainly heard enough to know we have a serious issue here,” said Garamendi, who attended the first of five meetings Thursday night in Oakland. The remaining meetings will be held next month in Southern California.

In May, city attorneys from San Francisco, Oakland and Los Angeles, along with several community groups, petitioned Garamendi, asking him to require insurers to focus more on driving records than geography when setting rates. They referred to a 1997 study showing that residents in low-income neighborhoods paid higher car insurance rates than those in wealthier districts.

The problem persists five years later, according to the latest study of the problem. To illustrate the point, consumer groups held a news conference Thursday along Broadway at 41st Street in Oakland, the dividing line between two ZIP codes.

For one ZIP code, standard coverage for a female driver with 22 years of driving experience and no violations was $1,444.50. In the adjacent ZIP code, the same driver would pay $1,869.22.

Mark Savage, a senior attorney at Consumers Union, said not much has changed in the five years since the first study. “The fundamental inequity remains the same at a large level,” he said.

Consumer advocates are pushing for stricter enforcement of Proposition 103, a 1988 initiative that called for driving record, annual mileage and years of driving experience to be the key factors in setting insurance rates.

A state Court of Appeal weakened that proposition in December 2000 with a ruling that allowed a driver’s home address to be considered when adjusting rates because location is “a more important determinant of the risk of loss than any other single factor.”

At the time of the ruling, Chuck Quackenbush was state insurance commissioner. Now that Garamendi is in charge, consumer groups are hoping for a change in mentality.

“It’s really important to get this fixed as soon as we can,” Savage said.

Although Garamendi said that geography should play a role in setting insurance rates, it should not be the dominant role.

He said that he expects to propose new regulations in March and that they could be implemented by July.
E-mail Pia Sarkar at [email protected]

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