OPINION: Auto insurance pricing that makes sense to all? Good luck

Published on

San Gabriel Valley Tribune (California)

Think of conflicts between the cities of California and the state’s vast rural areas and the first thing that comes up is water. But water peace may be at hand, at least for awhile, especially since a late-2003 deal should soon see San Diego County buying vast quantities of Colorado River water from the farmers of the Imperial Valley, thus taking pressure off the wild rivers of Northern California.

But there is no such peace at hand in another major area of city-country dispute: car insurance rates.

For decades, insurance companies have favored country folk, basing most insurance prices on ZIP codes. Where a person lives now has more to do with premium levels than even such a personal factor as driving records.

Example: Testimony at one state hearing in Oakland showed that a woman with a 22-year record of good driving [no accidents or tickets] would pay a yearly premium of $1,442.50 from leading company Allstate if she lives in that city’s affluent Piedmont district. But in the less attractive Temescal district, the same woman with the same record and the same car would pay $1,870.22.

The contrasts can be even more severe when rates in urban Compton and Lawndale are compared with those in rural Weaverville or Sonora.

But the fact that rates are based as much on where someone lives as on how they drive and how far they drive daily runs squarely counter to the provisions of Proposition 103, the insurance rate rollback proposition that passed by a large margin in 1988.

That law says premiums must be based on three mandatory factors: individual driving records, miles driven annually and years of driving experience. In short, voters were saying that the better a driver, the more experience and the less he or she drives, the lower the payment should be.

But regulations adopted later by the since-disgraced Republican Insurance Commissioner Chuck Quackenbush allowed insurance companies to keep right on with their old practice of ZIP code ratings and also to use gender and marital status in calculating premiums. Yet, there is no evidence that married persons drive any safer than singles.

“It’s insurance company larceny,’ complained one urban resident at the Oakland hearing. “We’re being penalized because of where we live.’

But the insurance industry insists its practices are fair, that by their nature some areas see higher accident rates and claims costs, and a 2001 decision by a state Court of Appeals upheld current practice. Which infuriates safe drivers who live in many urban, high- rate areas who somehow manage to steer clear of accidents and tickets.

Consumer groups including the Foundation for Taxpayer and Consumer Rights, whose president Harvey Rosenfield wrote and sponsored Proposition 103, are now insisting the rules change to end so-called “zip code discrimination.’ They don’t dispute that this would see rates rise for more than 60 percent of California drivers. But they claim rates would not rise much for safe drivers in those areas, while they’d drop precipitously for those in most city cores.

The major argument for change is that good drivers in bad accident areas in effect subsidize bad drivers in low-accident regions.

“Why should a great driver who lives in a challenged neighborhood have to pay the freight for a lousy driver in a wealthy area?’ Oakland City Attorney John Russo argued at one news conference.

But rural politicians are just as concerned about their constituents. More than a dozen non- citified state legislators have signed letters protesting any change for fear it would make life difficult for poor and elderly drivers in their districts.

But change is imminent. “I’ll do something with this by midsummer at the latest,’ says current Insurance Commissioner John Garamendi. “The appeals court has given me great leeway. Quackenbush put together a formula that isirrational. We are now looking for fairness. My aim is that at the end of this, everyone will say that what we’ve done makes sense.’

Garamendi will need a lot of skill and luck to find that kind of consensus.

The bottom line on this one seems very different from the end result of the latest water battles, where everyone seems to have won in the end. This time, chances are someone’s got to lose.
Thomas Elias is an author and freelance writer. E-mail him at [email protected]

Consumer Watchdog
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