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Consumer Groups Speak Out Against Insurance Discrimination in Chico, CA

Wednesday, March 3, 2004
Doug Heller – Fdn for Taxpayer & Consumer Rights, 310-480-4170
Michael McCauley – Consumers Union, 415-431-6747
Mark Savage – Consumers Union, 415-572-0039
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

CHICO, 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 the state, including Butte County and the surrounding region. For example, a female driver with 22 years of experience and no traffic violations or accidents living in the 95926 ZIP code of Chico pays $1,189 each year for standard coverage to one leading insurer. But if she were to move to the 95928 ZIP code of Chico, she would pay $1,289 – or $100 more – for identical coverage. In nearby Durham (95938), this same driver would pay even more — $1,363.
Likewise, in neighboring Colusa County, this same driver would pay $1,219 if she lived in Williams (95987). But if she moved to the town of Colusa (95932), her rate would jump to $1,384. And she would pay $1,393 if she lived in Olivehurst (95961) in nearby Yuba County.
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 Chico who has a perfect driving record pays $823 to Geico for standard full coverage if he is married. But if he is single, this same driver pays $1,116 for identical coverage. If this driver lived in Placerville in El Dorado County, he would be charged $987 if he is married, but $1,338 if he is single. And if he lived in Greenville in Plumas County, he would be charged $750 if he is married, but $1,016 if he is single. The same mature driver with nearly 30 years of perfect driving experience pays as much as 36 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.
State Insurance Commissioner John Garamendi will hold the latest in a series of statewide town hall meetings on the proposal in Chico on March 3, at 6:00 pm, in Room 210 of the Bell Memorial Auditorium at the California State University – Chico Campus (corner of 2nd Street & Hazel).