SAN FRANCISCO — Consumer advocates told an appeals court yesterday that the state is giving its blessing to insurance companies that violate a voter-approved measure to reduce auto insurance rates.
Under Proposition 103, passed in 1988, the bulk of auto insurance rates were to be calculated based on a driver’s record, annual miles traveled and number of years behind the wheel, a group of consumer groups told the state’s 1st District Court of Appeal.
But the insurance industry is basing a large part of premiums on where somebody lives, violating the measure and resulting in huge premium disparities among similar drivers.
“Twelve years after voters passed Proposition 103, insurance companies are still using ZIP codes as the single most important factor in setting auto rates,” said Mark Savage, an attorney with Public Advocates, which is representing a variety of community groups in the lawsuit.
A woman with 27 years’ driving experience living in the Los Angeles suburb of Pacoima, for example, would pay a $772 annual premium, compared with $281 if she lived in San Luis Obispo. Her premium is 63 percent higher solely because of her ZIP code, Public Advocates said.
The insurance industry said there is a good reason for charging higher premiums based on where drivers live. Drivers in San Francisco, Oakland and Los Angeles, for example, pay more because it costs more to insure motorists in high-crime and high-accident areas.
If the consumer groups prevail, the industry said, premiums for motorists in other areas will increase to subsidize others.
“What’s going to happen, in most counties in California, rates are going to go up,” said Vanessa Wells, a State Farm Insurance Co. attorney.
Savage told the court that even if it’s more expensive in those areas to issue insurance, Proposition 103 forbids insurance companies from using ZIP codes as a primary factor when calculating rates.
Justice Marc Poche said the Department of Insurance‘s rules allowing ZIP codes to weigh heavily in premiums is out of line with Proposition 103. But the court said it will hold off on ruling until a new insurance commissioner has an opportunity to review the department’s rules.
Retired appellate Justice Harry Low, who is replacing Commissioner Chuck Quackenbush next week, didn’t immediately return phone calls to his San Francisco law office.