Thursday, April 1, 2004
Mark Savage – Consumers Union, 415-572-0039 (cell), 415-431-6747
Doug Heller – Fdn for Taxpayer & Consumer Rights, 310-480-4170
Michelle Rodriguez, Public Advocates, 415-431-7430, ext 126
Insurers Charge Higher Premiums for Drivers in Certain ZIP Codes
And More for Single and Widowed Drivers Than Married
HANFORD, 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 marital status and gender – instead of their driving record.
That could change if the California Department of Insurance adopts a proposal by community and consumer groups to require auto insurers to base their rates primarily on how a policyholder drives, not where they live or whether they are married.
“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. And those of us with insurance end up paying a higher ‘uninsured motorist’ premium as a result.”
Basing auto insurance premiums primarily on where a driver lives results in unfair disparities throughout California, including Assembly District 30, the site of a public meeting on the proposal organized by Assemblymember Nicole Parra. For example, a female driver with 22 years of experience and no traffic violations or accidents living in Coalinga (93210) is charged $1,252 each year for standard coverage by one leading insurer. But if she lived in the Laton (93242), she would pay $1,445 — or almost $200 more — for identical coverage. Likewise, if this same driver lived in Hanford (93230), she would pay $1,272, but she would be charged $1,424 if she lived in Stratford and $1,446 if she lived in Bakersfield (93307).
Drivers in some small towns in Assembly District 30 are charged higher rates than drivers in much larger communities in other parts of the state. For example, the good driver described above would be charged $1,448 if she lived in the 93270 ZIP Code of Terra Bella (city population 3,466), but $1,213 — or more than $200 less — if she lived in the 91320 ZIP code of Thousand Oaks (city population 117,005). Similarly, this same driver would pay $1,428 if she lived in the 93219 ZIP code of Earlimart (city population 6,583), but $1,221 if she lived in the 92182 ZIP code of San Diego (city population 1,223,400).
“When insurance companies base their auto premiums primarily on ZIP code, the result has been unfair, even nonsensical, premiums across California,” said Savage. “Some small towns pay more than much bigger cities that have more traffic. This discriminatory practice is making it harder for California’s working families to afford the insurance coverage they are required by law to maintain.”
Equally troubling is the fact that many insurers are charging higher rates to experienced single drivers compared to those who are married, even though they have spotless driving records. For example, a 45 year old male living in Fresno who has a perfect driving record would pay $1,200 to Geico for standard full coverage if he is married. But if he is single, this same driver would pay $1,626 for identical coverage. If this driver lived in Bakersfield in Kern County, he would be charged $705 if he is married, but $955 if he is single. If he lived in Mammoth Lakes in Mono County, he would be charged $652 if he is married, but $884 if he is single. And if he lived in Visalia in Tulare County, he would be charged $889 if he is married, but $1,205 if he is single. The same mature driver with nearly 30 years of perfect driving experience pays as much as 35 percent more merely because he is not married.
“It simply is not fair for insurers to charge higher rates for drivers who are single rather than married,” said Michelle Rodriguez of Public Advocates. “How can an insurance company possibly justify charging a higher premium for someone who loses a spouse and becomes a widow or gets divorced and becomes single? Their driving hasn’t changed – just their marital status.”
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 like marital status.
“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 their marital status or 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.