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CA Insurance Commissioner ends “zip-code profiling”

December 22, 2005


SAN FRANCISCO, CA – Consumer and civil-rights organizations and the cities of Oakland, San Francisco, and Los Angeles applaud Insurance Commissioner John Garamendi’s decision today to adopt regulations requiring California’s insurers to base automobile insurance premiums primarily on how well one drives, not where one lives. In a long-awaited victory for California’s drivers, Garamendi announced today that he would end the insurers’ unfair practice of “zip-code profiling” and giving greater weight to one’s ZIP Code, gender, marital status, than to how well one drives.
“We applaud Commissioner Garamendi’s decision today,” said Mark Savage, Senior Attorney at Consumers Union, the non-profit publisher of Consumer Reports. “It means that auto insurance rates will finally be based primarily on how well you drive, as the voters intended 17 years ago when they passed Proposition 103, not on where you live, your marital status, or other factors. Commissioner Garamendi’s action is the right thing to do in every sense, both legally to enforce Proposition 103, and to bring fairness and rationality to California’s auto insurance premiums.”
In May 2003, a coalition of consumer and civil-rights organizations petitioned Commissioner Garamendi to strike down a regulation adopted by former Commissioner Chuck Quackenbush in 1996. The Quackenbush regulation allowed insurers to circumvent Proposition 103 by giving far more weight to a driver’s ZIP code and other criteria. Today, Commissioner Garamendi announced that he intended to adopt language proposed by the petition to finally bring relief to years of injustice in automobile insurance pricing.
The petition was filed by Consumers Union, Foundation for Taxpayer and Consumer Rights, the National Council of La Raza, the Southern Christian Leadership Conference of Greater Los Angeles, Spanish Speaking Citizens’ Foundation, Public Advocates, and City Attorney John Russo for Oakland, City Attorney Dennis Herrera for San Francisco, and City Attorney Rocky Delgadillo for Los Angeles.
“Oakland has been waiting a long time for this,” said Oakland City Attorney John Russo who hosted the first town hall meeting in 2003. “We’re pleased the Commissioner has decided to rectify the auto insurance industry’s discrimination against good drivers who live in challenged neighborhoods.”
“California drivers have gotten an early present this Holiday Season in fairer auto insurance rates,” said San Francisco City Attorney Dennis Herrera. “I applaud Insurance Commissioner Garamendi for his leadership and thoughtful process in working to end ‘ZIP Code profiling’ in California.”
Proposition 103, enacted by the voters in 1988, requires that automobile insurance premiums be based on three mandatory factors: driving record, miles driven, and years of driving experience. Other factors are allowed, but each must have less importance than each of the mandatory factors.
After hearing directly from the people of California in townhall meetings across California in late 2003 and early 2004, Commissioner Garamendi promised to change the regulations. “I will change the regulations. Let there be no doubt about that. There has been sufficient information given thus far in these four community previous four community hearings to convince me that the current regulations are unjust, unfair, and must change.” Today’s announcement does just that.
For further information, see www.consumersunion.org/issues/insurance.html.
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Mark Savage (415) 431-6747
Erica Harrold, Oakland (510) 599-6874
Matt Dorsey, San Francisco (415) 554-4662
Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.