Learn More about Discrimination in Auto Insurance in California
By Consumers Union on Thursday, December 18th, 2003
1. Who is Affected by Zip-Code Rating in California? (fact sheet)
2. Action Alert (letter)
3. What Can you Do about ZIP-Code Rating (PDF format only)
4. SEGURO DEL AUTOMÓVIL TALLER Y REUNIÓN DE INFORMACIÓN (PDF format only)
Did you know that millions of Californians pay higher auto insurance premiums simply because of the ZIP code they live in?
It’s true. When insurers decide how much to charge for auto coverage they put greater weight on such things as ZIP code, marital status and gender than they do on how well a person drives.
Earlier this year, consumer groups and other public leaders petitioned Insurance Commissioner John Garamendi to end this discriminatory practice. Read on to find out how you can lend your support to this important reform effort.
Basing auto rates on where a driver lives and not on how well they drive is unfair. For example, a good driver, licensed 22 years with no traffic accidents or violations can see her premiums double or triple by simply moving from one ZIP code to another. In another example, the same driver, with an identical driving record and the same driving profile, who seeks coverage from one major insurer would be charged $5,526 if he lived in the Oakland’s Fruitvale district, while he would pay only $4,212 if he lived in the wealthier Montclair district — a difference of 24% based on ZIP Code!
Allowing insurance companies to base their auto rates primarily on ZIP codes has made insurance coverage unaffordable for many low income drivers. That’s unfair and it hurts all of us because it means there are more uninsured and underinsured drivers on the road. You can help end such discrimination by urging the Insurance Commissioner to require auto insurers to base their auto insurance premiums on how well someone drives not their ZIP code.
Also, join city and community leaders from the Bay Area at the Department of Insurance’s town hall meeting on December 4, 2003, at 6-9:00 p.m., at the Elihu Harris State Building Auditorium, located at 1515 Clay Street, between 15th & 16th St. Let Commissioner Garamendi know this issue matters to you.
Thank you for your help. For more information, please contact:
Michelle Natividad Rodriguez
Public Advocates, Inc.
131 Steuart, Suite 300
San Francisco, CA 94105
Tel. (415) 431-7430 ext. 126
Fax (415) 431-1048
In short, over 20 million drivers California-wide.
How do we know? California’s insurers must disclose in filings with the California Department of Insurance how each calculates a driver’s automobile insurance premium using standard examples.
(1) The first example is a single man, licensed for two years, who drives 15 miles each way to school (15,000 annual miles). He purchases little more than the minimum coverage mandated by law in order to drive ($15,000/$30,000 for bodily injury coverage, $5,000 for property damage coverage, and minimal coverage for medical payments and uninsured motorist coverage). He has one at-fault accident with $1,000 of property damage.
(2) The second example is a single woman, licensed for 22 years, with no violations–a Good Driver under Proposition 103. She drives a 1996 Honda Accord LX sedan 20 miles each way to work (16,000 annual miles). She purchases $100,000/$300,000 of bodily injury coverage, $50,000 of property damage coverage, $5,000 of medical payments coverage, and $30,000/$60,000 of uninsured motorist bodily injury coverage. She has a $100 deductible on comprehensive coverage and $200 deductible on collision coverage.
For each of these two examples, we calculated premiums for three of California’s largest automobile insurers using these two examples–taking the same driver with the same driving record, driving the same car with the same coverage, and changing only the driver’s ZIP Code. We calculated these examples for their class plans in 2002. The results illustrate the severe impact of ZIP Code rating if Commissioner Garamendi does not amend the regulations to comply with Proposition 103. Insurers’ arbitrary and discriminatory use of ZIP Code rating in violation of Proposition 103 exists statewide, among “urban” areas, among “rural” areas, between “urban” and “suburban” areas, and for Good Drivers.
A. THE RESULTS VIOLATE PROPOSITION 103 AND DEMONSTRATE ONCE AGAIN THE UNFAIRNESS OF TERRITORIAL RATING STATEWIDE:
When the man driving to school moves from San Luis Obispo (93401) to South Central Los Angeles (90062), his annual premium with one leading insurer increases from $2,336 to $8,255. For the same driver, with the same driving record, purchasing the same coverage for the same automobile, ZIP code alone increases his premium more than $5,900, or 253 percent.
B. INSURERS’ ARBITRARY AND DISCRIMINATORY USE OF TERRITORY EXISTS AMONG “URBAN” AREAS:
When this young man moves from ZIP Code 90044 in Los Angeles to ZIP Code 90045 in Los Angeles, another leading insurer drops his annual premium from $3,309 to $2,818. His premium increases $491, or 17 percent, for living in the wrong ZIP code.
In Oakland, when this man drives fifteen miles from the predominantly Latino Fruitvale District in East Oakland (94601) to school in Oakland’s upper middle-class Montclair District (94611), a major insurer charges him an annual premium of $5,526. If the ZIP codes are reversed, however, and he drives from Montclair (94611) to school in the Fruitvale District (94601), this insurer drops his annual premium over $1,300, or 24 percent, to $4,212.
When he drives fifteen miles from Oakland’s Montclair (94611) to the predominantly African-American inner-city of East Oakland (94621), another leading insurer charges him an annual premium of $2,243. But again, if the ZIP codes are merely reversed and he drives from inner-city East Oakland (94621) to a school in Montclair (94611), the insurer increases his annual premium over $630, or 28 percent, to $2,876.
C. INSURERS’ ARBITRARY AND DISCRIMINATORY USE OF TERRITORY EXISTS FOR GOOD DRIVERS:
Recall the example of the single woman, licensed 22 years, with no violations -a Good Driver under Proposition 103. When she moves from San Luis Obispo (93401) to Los Angeles (90036), a leading California insurer increases her annual premium from $951 to $1,850, an increase of over $898, or 94 percent, for ZIP Code alone.
D. INSURERS’ ARBITRARY AND DISCRIMINATORY USE OF TERRITORY EXISTS AMONG “URBAN” AND “SUBURBAN” AREAS:
When this Good Driver drives from suburban Walnut Creek (94596) with the rushhour traffic to and from work in downtown San Francisco (94103), a third leading insurer charges her an annual premium of $1,150. But if the ZIP Codes are reversed, and she drives against the rushhour traffic from San Francisco (94103) to work in Walnut Creek (94596), this insurer increases her annual premium to $1,700, an increase of $550, or 48 percent, for ZIP Code alone.
E. ZIP CODE ALONE ACCOUNTS FOR INCREASES OF 159-295 PERCENT ACROSS CALIFORNIA FOR A YOUNG MAN DRIVING TO SCHOOL, AND 111-238 PERCENT ACROSS CALIFORNIA FOR A FEMALE GOOD DRIVER, LICENSED 22 YEARS:
Example 1: The three leading California insurers increased premiums for the same young man driving to school, with the same driving record, driving the same car with the same coverage–changing only his ZIP Code–by a range of 159 percent to 295 percent across the range of 100 plus examples calculated.
Example 2: For the same Good Driver licensed 22 years, with the same driving record, driving the same car with the same coverage–again, changing only her ZIP Code–these three leading California insurers increased premiums by a range of 111 percent to 238 percent within the 100 plus examples calculated.
January 8, 2004
End Zip-Code Rating and Discrimination in Automobile Insurance –
Key Hearings with Insurance Commissioner Garamendi and Community Leaders in Los Angeles, Van Nuys, Buena Park, and San Diego on January 13th, 22nd, 27th 2004
In January 2004, a landmark opportunity exists to join city and community leaders from around the Los Angeles and Southern California area at four town hall meetings to urge California Insurance Commissioner John Garamendi to end ZIP-Code rating and discrimination in automobile insurance and require insurers instead to base automobile insurance premiums primarily on how well Californians drive, not their ZIP Code.
These town hall meetings follow a petition by Consumers Union of U.S., Foundation for Taxpayer and Consumer Rights, Southern Christian Leadership Conference of Greater Los Angeles, National Council of La Raza, Public Advocates, Spanish Speaking Citizens’ Foundation, and the cities of Los Angeles, Oakland, and San Francisco. In 1988 California’s voters enacted Proposition 103, which required insurers to give greatest weight to one’s driving safety record in determining automobile insurance premiums, not drivers’ ZIP Code, gender, and marital status. To date, however, the Insurance Commissioner’s regulations still allow California’s leading insurers to give greater weight to one’s ZIP Code than to one’s driving safety record.
Commissioner Garamendi is having hearings to consider amending former Insurance Commissioner Chuck Quackenbush’s regulations. We believe this issue is of great importance to your organization and its members, and urge you to come have your voice heard by Commissioner Garamendi and other public leaders.
Basing auto rates primarily on where a driver lives is unfair to all Californians. The examples are outrageous. A young man driving to school, who moves from San Luis Obispo (93401) to South Central Los Angeles (90062), saw his annual premium with one leading insurance company increase from $2,335 to $8,254. For the same driver, with the same driving record, purchasing the same minimal coverage for the same automobile, ZIP Code alone increased his premium almost $6,000, or over 250 percent.
To demonstrate to the Commissioner that new regulations should be adopted that require car insurance rates to be based primarily on how policyholders drive and not where they live, we ask you to consider doing the following:
1) Urge your organization and your organization’s members to attend their local hearings and urge Commissioner Garamendi to support new regulations barring auto insurance rates based mostly on ZIP Code. Please contact us and let us know if you will attend and how many of your members we can count on at the hearing. The hearings are:
January 13, 2004
Marvin Braude Building
6262 Van Nuys Blvd.
(between Victory Blvd. & Oxnard St.)
January 22, 2004
City of Buena Park/ City Hall
6650 Beach Boulevard
(betwn. Commonwealth & Orangethorpe, off I-5)
January 22, 2004
Crenshaw Christian Center
7901 South Vermont Avenue
(between W. Manchester & W. Florence)
January 27, 2004
Jacobs Center for Non-Profit Innovation
5160 Federal Blvd., Suite A
2) In addition, we request that you consider submitting a letter of support, either by agreeing to be a signatory on our group letter (see the Medicare Modernization Act attached for your review), or by sending your own letter to Commissioner Garamendi. Please contact us if you plan to be a signatory on our group letter or submit your own letter.
3) Please encourage your members to send a letter of support, which will be forwarded to the Commissioner, through “http://cu.convio.net/ins_discrimination_CA ”. Click on the “End Unfair Auto Insurance Discrimination” link.
4) We have informative factsheets and pamphlets available for your members. Upon request we will email, fax or mail them to you so that you may distribute them.
Please contact Doug Heller at (310) 392-0522 x309 or Michelle Rodriguez at (415) 431-7430 x126. We will be following up with you shortly. With your help, we can make a change for the better that will benefit the entire community. Thank you very much for considering lending your support to this issue.
Very truly yours,
Harvey Rosenfield, Founder and Author of Prop 103
Doug Heller, Senior Consumer Advocate
Pamela Pressley, Litigation Director
FOUNDATION FOR TAXPAYER AND CONSUMER RIGHTS
Rockard J. Delgadillo, City Attorney
Don Kass, Supervising Deputy City Attorney
CITY OF LOS ANGELES
Mark Savage, Counsel for:
NATIONAL COUNCIL OF LA RAZA;
SOUTHERN CHRISTIAN LEADERSHIP CONFERENCE OF GREATER LOS ANGELES; and SPANISH SPEAKING CITIZENS’ FOUNDATION
Norma García, Senior Attorney
Mark Savage, Senior Attorney
CONSUMERS UNION OF US, INC.
John A. Russo, City Attorney
Daniel Rossi, Deputy City Attorney
Karen Boyd, Legal Communications Director
CITY OF OAKLAND
Dennis J. Herrera, City Attorney
Owen Clements Deputy City Attorney
CITY & COUNTY OF SAN FRANCISCO
Richard Marcantonio, Managing Attorney
Michelle N. Rodriguez, Law Fellow
PUBLIC ADVOCATES, INC.
SEGURO DEL AUTOMÓVIL TALLER Y REUNIÓN DE INFORMACIÓN (PDF format only)