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Coalition Speaks Out Against Auto Insurance Discrimination in San Diego

Tuesday, January 27, 2004
Michael McCauley – Consumers Union, 415-431-6747
Doug Heller – Fdn for Taxpayer & Consumer Rights, 310-480-4170
Connie Hernandez – MAAC Project, 619-426-3595, ext 208

Some Good Drivers Pay Hundreds of Dollars More
for Auto Insurance Because of the ZIP Code They Live In

SAN DIEGO, 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.
“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 Norma Chavez of the MAAC Project. “This discriminatory practice is making it harder for California’s working families to afford the insurance coverage they are required by law to maintain.”
The coalition held a news conference today in the City Heights neighborhood of San Diego to dramatize the unfair disparity that results when auto insurance premiums are based primarily on ZIP code. One leading insurer charges $1,076.40 for standard full coverage for a female driver living in the wealthy La Jolla (92037) community. But if this same driver lived in the working class City Heights (92105) neighborhood she would be charged 1,323.80 – or $247.40 more for identical coverage.
For liability-only coverage, the same driver described above would be charged $550 by one leading insurer if she lived in Coronado (92118), but $686 if she lived across the bridge in Barrio Logan (92113). This same good driver would pay $522 if she lived in South San Diego (92154), but $732 if she lived in Sherman Heights (92102). Likewise, another leading insurer would charge a La Jolla (92037) resident $606, but $728 to a Vista (92083) resident.
“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 Doug Heller of the Foundation for taxpayer & Consumer Rights. “The voters are looking to Insurance Commissioner Garamendi to correct this injustice so that drivers who have a good safety record don’t 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.
“Californians shouldn’t be penalized with higher auto insurance rates just because of their ZIP code,” said Chavez. “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.”
State Insurance Commissioner John Garamendi will hold the latest in a series of statewide town hall meetings on the proposal in San Diego on January 27, at 6pm at the Jacobs Center for Non-Profit Innovation at 5160 Federal Boulevard, Suite A..