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Insurance industry mounts last-ditch effort to block proposal to end discriminatory “zip code profiling”

April 6, 2006

Industry-Sponsored Bill Seeks To Amend Proposition 103 and Prevent Insurance Commissioner from Providing Fairer Premiums to Good Drivers Across California

Sacramento, CA – Insurance industry trade associations are pushing state lawmakers to support legislation introduced today to allow insurers to continue charging good drivers higher premiums because of their ZIP Code, gender, marital status, and other factors. Insurance Commissioner John Garamendi recently promised to end the insurance industry’s discriminatory “ZIP Code profiling” by June.
“The insurance industry is determined to do all it can to continue discriminating against California’s good drivers based upon their ZIP Code, gender, and marital status,” said Mark Savage, Senior Attorney at Consumers Union, the non-profit publisher of Consumer Reports. “This bill is an unconstitutional attempt by the insurance industry to circumvent the will of the voters and should be rejected by state lawmakers.”
AB 2840 (Benoit) would prevent the Insurance Commissioner from enacting regulations to base automobile insurance premiums primarily on one’s driving safety record, annual mileage, and years of driving experience. Currently, insurers often base automobile insurance premiums primarily on ZIP Code, gender or marital status. This allows insurers to charge dramatically higher premiums for good drivers in many urban, suburban, and rural ZIP Codes across California. The bill would prohibit the Insurance Commissioner from taking action until another study on the issue is completed by the California State Library and the California Research Bureau.
Data in the insurance companies’ rate filings with the California Department of Insurance demonstrate that the insurance industry’s current system is unfair to good drivers across California. And contrary to the industry’s claims, insurers charge good drivers dramatically unfair premiums in Northern California, the Central Valley, and rural areas, just as they do in Los Angeles, the San Francisco Bay Area, and San Diego.
For example, in the Central Valley, the premium for an extraordinarily good driver, licensed 22 years with no accidents or violations, driving the same car with the same coverage, could vary $757 or 75 percent from one ZIP code to another. In Northern California, the premium for this good driver could vary $308 or 28 percent from one ZIP code to another. Under the current system, insurers charge good drivers in small towns such as Chinese Camp in Tuolumne County (pop. 146) premiums that are 11-38 percent higher than premiums in such communities as Palo Alto 94301 in Santa Clara County (pop. 58,598), Concord 94519 in Contra Costa County (pop. 121,780), Torrance 90503 in Los Angeles County (pop. 137,946), Long Beach 90815 in Los Angeles County (pop. 461,522), and San Diego 92111 (pop. 1,223,400). When insurers can determine premiums primarily on where one lives rather than on how well one drives, their own rate filings show that they often charge good drivers in small rural towns far higher premiums.
Similarly, in the San Francisco-Oakland Bay Area, the premium for this same good driver could fluctuate wildly up to $891 or 87 percent from one ZIP code to another. In the Los Angeles area, the premium for this same good driver could vary $721 or 55 percent from one ZIP code to another. In the San Diego area, premiums for this good driver fluctuate $314 or 31 percent.
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. In December, 2005, 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.
“Insurers would profit handsomely from any delay of Insurance Commissioner Garamendi’s proposal to provide premium decreases to California’s good drivers,” said Savage. “In 2005 alone, this system has allowed California’s auto insurance industry to generate over $2 billion in after-tax profits instead of providing lower and fairer premiums to good drivers. Clearly insurance companies can implement Commissioner Garamendi’s proposed regulation without unfairly raising any premiums for good drivers.”
For further information, see www.consumersunion.org/issues/insurance.html
Mark Savage or Michael McCauley:
(415) 431-6747