Insurance: An advocacy group claims Geico, the Auto Club and Safeco overcharge those without prior coverage.

Los Angeles Times

A consumer advocate group has sued three auto insurers, alleging the companies violated California’s Proposition 103 by overcharging new customers who lacked prior insurance coverage.

Santa Monica-based Foundation for Taxpayer and Consumer Rights claims that Safeco Insurance Co., Geico Corp. and the Automobile Club of Southern California are ignoring the law by not giving “good-driver” discounts to uninsured motorists who apply for coverage.

The lawsuit, filed Friday in Los Angeles Superior Court, claims that the three companies also “knowingly and actively” concealed the practice from regulators and consumers. An Auto Club spokeswoman said Monday the insurer was following the law and that its rates had not been questioned by regulators.

“We file all of our rating plans with the Department of Insurance and we rely on their approval to make sure we’re in compliance,” said spokeswoman Carol Thorp.

Geico did not return calls for comment and a Safeco spokesman said he could not comment about ongoing litigation.

Proposition 103, which voters approved in 1988, was designed to reduce auto rates and change insurers’ underwriting practices. The law requires insurers to give certain customers a 20% “good-driver” discount, and says that lack of prior insurance coverage “in and of itself shall not be a criterion for determining eligibility.”

Lack of insurance also can’t be used to determine premiums or a driver’s insurability.

Foundation spokeswoman Pam Pressley said the lawsuits were prompted by the group’s research using the companies’ Web sites. Applicants who clicked a box indicating that they were not currently covered by insurance were quoted higher rates by the three companies than when the applicants indicated they already had insurance, she said. The rates were later confirmed by insurance agents, she said.

Consumer groups have battled with Auto Club and Safeco before over the issue of what to charge previously uninsured drivers. In 1996, a San Francisco Superior Court judge invalidated efforts by the two insurers to impose surcharges on such drivers.

The number of drivers who might be affected by the lawsuit is unclear. Insurers estimate about 22% of drivers statewide, and one out of three drivers in Los Angeles, are uninsured, but it is not known how many of those drivers apply for coverage each year.

The Auto Club is California’s fifth-largest auto insurer, with 8.7% of the market. Geico has a 2.6% market share while Safeco writes 1.6% of the state’s coverage by premium.

The Geico group of insurance companies is owned by Berkshire Hathaway Inc. Safeco is a subsidiary of Safeco Corp. The Auto Club is a membership organization.

Top 12 California Auto Insurers:

A consumer group is suing Auto Club of Southern California, Geico and Safeco, three of the state’s largest auto insurers.

State Farm: 12.6% (market share)

Farmers: 12.5

Allstate 10.2

Cal St. Auto Group: 10.2

Auto Club of So. Cal: 8.7

Mercury: 7.7

AIG: 6.8

USAA: 3.2

Geico: 2.6

Progressive: 2.0

Great American: 1.9

Safeco: 1.6

Note: Market share figures are for 2001 and reflect percentage of premiums written by each company.

Source: California Department of Insurance