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Coalition Speaks Out Against Auto Insurance Discrimination in Los Angeles

Thursday, January 22, 2004
Michael McCauley – Consumers Union, 415-431-6747
Eric Moses – Office of Los Angeles City Attorney, 213-978-8340
Doug Heller – Fdn for Taxpayer & Consumer Rights, 310-392-0522, ext 309
Vicki Phillips – Southern Christian Leadership Conference, 323-750-2326

Groups Go to Los Angeles Intersection Where Premiums Increase $500 For Good Drivers Living on the “Wrong” Side of ZIP Code Boundary

LOS ANGELES, CA – Millions of Californians pay higher auto insurance premiums because of the neighborhood they live in even though they have good driving records and despite the fact that Proposition 103 banned premiums based primarily on ZIP code. That is because state regulations enacted by former Insurance Commissioner Chuck Quackenbush allow insurers to base their auto premiums mostly on a policyholder’s ZIP code – and even gender and marital status – instead of their driving record.
That could change if the California Department of Insurance adopts a proposal by community and consumer groups and the cities of Los Angeles, Oakland, and San Francisco to require auto insurers to base their rates primarily on how a policyholder drives, not where they live.
“Californians shouldn’t be penalized with higher auto insurance rates just because of their ZIP code,” said Los Angeles City Rocky Delgadillo. “We urge the Department of Insurance to end this discriminatory practice so that auto insurance premiums are based on how well you drive not where you live.”
To dramatize the unfair disparity that results when auto insurance premiums are based primarily on ZIP code, the coalition held a news conference today at the intersection of Vermont and El Segundo Boulevard, the border between the 90044 (South Los Angeles) and 90247 (Gardena) ZIP codes. One leading insurer charges an annual premium of $930 for standard liability coverage for a female driver living on the 90247 side of the street who has 22 years of driving experience with no accidents or traffic violations. If this same good driver moved across the street into the 90044 ZIP code, she would pay $1,439 – about $500, or 53 percent, more.
Dramatic disparities also exist between other ZIP codes in the Los Angeles area. For example, the same good driver described above would be charged $590 for standard liability coverage by one leading insurer if she lived in Thousand Oaks in Ventura County. But if she lived in Tarzana she would pay $1,342 and $1,530 — or 159 percent more — if she lived in the more working class community west of downtown Los Angeles. Likewise, this same driver would be charged $856 for standard liability coverage if she lived in Valencia, but $1263 if she moved to less affluent Van Nuys. This same good driver living in predominantly low income South Central Los Angeles would pay $1,280 – or 63 percent more – than if she lived in wealthier Palos Verdes, where she would pay $784 for identical standard liability coverage.
“Allowing insurance companies to base their auto premiums primarily on ZIP codes has made insurance coverage unaffordable for many low income drivers,” said Mark Savage, Senior Attorney for Consumers Union. “That hurts all of us because it means there are more uninsured and underinsured drivers on the road. Those of us with insurance end up paying a higher ‘uninsured motorist’ premium as a result.”
The coalition filed a petition with Insurance Commissioner John Garamendi last May calling on him to require auto insurers to base their premiums primarily on the three mandatory factors spelled out in the voter-approved Proposition 103 – driving safety record, miles driven, and years of driving experience. The petition seeks to strike down a regulation adopted by former Insurance Commissioner Chuck Quackenbush in 1996 that has allowed insurers to circumvent Proposition 103 by giving far more weight to a driver’s ZIP code and other criteria.
“Insurance companies used their influence over Quackenbush to subvert the will of the voters who enacted Proposition 103 fifteen years ago,” said Harvey Rosenfield, author of Proposition 103. “The voters are looking to Insurance Commissioner Garamendi to correct this injustice so that drivers who have a good safety record don¹t end up paying higher premiums because of the neighborhood they live in.”
Passed by voters in 1988, Proposition 103 allowed the Insurance Commissioner to adopt regulations authorizing the use of optional rating factors for determining insurance premiums. However, the weight or importance of any optional factor an insurers use, such as ZIP code, gender or marital status, must be less than the weight of each mandatory factor in determining auto premiums.
“Basing auto premiums primarily on where a driver lives is unfair to all Californians, but it has a particularly negative impact on the poor and communities of color,” said Reverend Norman Johnson of the Southern Christian Leadership Conference of Greater Los Angeles. “This discriminatory practice is making it harder for California’s working families to afford the insurance coverage they are required by law to maintain.”
State Insurance Commissioner John Garamendi will hold the latest in a series of statewide town hall meetings on the proposal in Los Angeles on January 22, at 6pm at the Crenshaw Christian Center at 7901 South Vermont Avenue.