State Agency Approves Commissioner Garamendi's New Rules To Base Auto Premiums on Motorists' Driving Records Rather Than ZIP Code; Insurers Must File New Plans In 30 Days
Santa Monica, CA — California auto insurance premiums will be based on motorists' driving records and not primarily on their ZIP code or marital status as is currently the practice, under new rules which received final approval today from the California Office of Administrative Law. The rules, issued by Insurance Commissioner Garamendi, implement the last unenforced provision of the 1988 insurance reform Proposition 103. Proposition 103 requires that auto insurance premiums be based primarily on three factors — driving safety record, annual mileage and years licensed. Other factors — including where drivers live, their gender and marital status and what kind of car they drive — can still be used to calculate rates, but none of those factors can have more of an impact on the price of auto insurance than any of the three driving-related factors.
"Seventeen years, eight months and six days after Californians demanded that auto insurers focus more on their driving record than their ZIP code, the voters' will has finally come to pass," said Douglas Heller, Executive Director of the Foundation for Taxpayer and Consumer Rights (FTCR). "Insurance companies have been dragging their feet for almost twenty years, while good drivers have been paying too much. Today's ruling is a victory for motorists and the end of the road for ZIP code-based rates."
Earlier this week, Auto Club of Southern California announced that it would begin phasing in the new rules immediately. The company said that it will be lowering policyholder premiums by an average of $134 for 88% of its customers, beginning on December 1, 2006. Under Garamendi's rules, insurers can phase in the changes over two years as long as they correct their premium structure by at least 15% immediately.
The nonprofit, nonpartisan FTCR, with Consumers Union, Public Advocates, community groups and and the cities of Los Angeles, San Francisco and Oakland, asked Commissioner Garamendi to craft these rules in June 2003. Prior to today's ruling, insurance companies followed regulations created by disgraced former commissioner Chuck Quackenbush, who developed a loophole allowing insurers to base rates primarily on a driver's ZIP code. That loophole is now closed, said FTCR, and insurers must submit new plans to follow Prop 103 to the Insurance Commissioner within 30 days.
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