Garamendi Wants Change in Car Insurance Rates

State Insurance Commissioner John Garamendi said Thursday that he will introduce regulations next week that would require insurers to base auto insurance rates primarily on a driver's record and not on where they live.
Under the provisions of Prop. 103 that took effect in 1988, insurers are supposed to focus on three primary factors in setting rates: driving record, miles driven, and driving experience. They are also allowed to consider secondary factors, such as the driver's zip code.

A recent study by Consumers Union, the non-profit publisher of Consumer Reports magazine, alleged that insurers were charging good drivers living in predominantly African-American and Latino zip codes in California substantially more for auto insurance than good drivers living in predominantly white communities. Industry groups have disputed those allegations.

In the proposed regulations, no secondary factor can have greater weight than any primary factor. Garamendi said that in following a department investigation, he came to the conclusion that the intent of Prop. 103 was not being upheld because zip codes often were given greater weight than warranted.

"For 17 years there have been competing interests fighting over the use of zip codes in the pricing of auto insurance in our state," he said in a statement. "I want to end the unfairness and the confusion. Auto insurers in California must base their rates primarily on how you drive and not where you live."

Garamendi said he has warned insurers not to use the new regulations as an excuse to raise rates arbitrarily. "I will work with them to develop a plan that minimizes any adverse adjustments that might otherwise result from the de-emphasis on zip code rating," he said.

The regulations are scheduled to delivered to the state Office of Administrative Law next week and should be completed in July, according to the department.