Survey exposes flaws in state's auto insurance
12/29/2005
Daily Democrat

Survey exposes flaws in state's auto insurance Daily Democrat At Issue Setting rates for auto insurance in California. Our Opinion New survey demands state examine the equality of determine how auto insurance rates are set. A study came out last week comparing automobile insurance rates in California. It was conducted by Consumers Union and brought up some interesting numbers gleaned from the state's three largest insurers.

The nonprofit group used race as a factor for its study and plugged in a female driver with no recent accidents and 22 years of experience. The fictional driver drove her 1996 Acura about 16,000 miles a year. What the study found was that in more than 500 ZIP codes, there's quite a discrepancy in insurance premiums. According to Consumer Union, car insurance in African-American neighborhoods cost 37.5 percent to 83.5 percent more than in communities dominated by non-Hispanic whites.

A good driver, the study says, could be charged as much as $974 per year more in the African-American neighborhoods. While those numbers are interesting, the survey doesn't tell the entire story. What it really boils down to, more than race, is where someone lives.

According to Quality Planning Corp., a motorist who lives within a mile of a church - where relatively few accidents resulting in property damage occur - would get a break on rates over someone who lives near restaurants. Yet an insurance reform initiative passed by California voters in 1988 was supposed to minimize the geographical differences in pricing. What the Consumers Union report really seems to suggest is that the auto insurance industry has basically ignored that initiative. Insurers claim they must rely on ZIP codes.

This way, as insurance companies operate, they can better predict a given driver's future so they can base a price on a policy. We wonder why insurance companies need a crystal-ball approach to rates rather than a driver's record and experience. Why should drivers with extensive experience and a perfect track record be stuck with higher premiums because they live nearer a restaurant than a church? Why can't insurance companies treat drivers on a case-by-case basis instead of picking on them for living in certain areas? We're basing rates on what might happen instead of what has happened, and that's simply unfair.

The current approach tends to hit working-poor people the hardest. Already, 14 percent of the cars in California are uninsured, due largely to the fact many drivers cannot afford the premiums. That's not to condone driving without insurance, but it is one explanation. Insurance Commissioner John Garamendi has promised to unveil new pricing guidelines in the next two weeks.

When he does, we ask for one thing - just be fair to ALL drivers. RETURN TO TOP Setting rates for auto insurance in California. Our Opinion New survey demands state examine the equality of determine how auto insurance rates are set. A study came out last week comparing automobile insurance rates in California.

It was conducted by Consumers Union and brought up some interesting numbers gleaned from the state's three largest insurers. The nonprofit group used race as a factor for its study and plugged in a female driver with no recent accidents and 22 years of experience. The fictional driver drove her 1996 Acura about 16,000 miles a year. What the study found was that in more than 500 ZIP codes, there's quite a discrepancy in insurance premiums.

According to Consumer Union, car insurance in African-American neighborhoods cost 37.5 percent to 83.5 percent more than in communities dominated by non-Hispanic whites. A good driver, the study says, could be charged as much as $974 per year more in the African-American neighborhoods. While those numbers are interesting, the survey doesn't tell the entire story.

What it really boils down to, more than race, is where someone lives. According to Quality Planning Corp., a motorist who lives within a mile of a church - where relatively few accidents resulting in property damage occur - would get a break on rates over someone who lives near restaurants. Yet an insurance reform initiative passed by California voters in 1988 was supposed to minimize the geographical differences in pricing. What the Consumers Union report really seems to suggest is that the auto insurance industry has basically ignored that initiative.

Insurers claim they must rely on ZIP codes. This way, as insurance companies operate, they can better predict a given driver's future so they can base a price on a policy. We wonder why insurance companies need a crystal-ball approach to rates rather than a driver's record and experience.

Why should drivers with extensive experience and a perfect track record be stuck with higher premiums because they live nearer a restaurant than a church? Why can't insurance companies treat drivers on a case-by-case basis instead of picking on them for living in certain areas? We're basing rates on what might happen instead of what has happened, and that's simply unfair. The current approach tends to hit working-poor people the hardest. Already, 14 percent of the cars in California are uninsured, due largely to the fact many drivers cannot afford the premiums. That's not to condone driving without insurance, but it is one explanation.

Insurance Commissioner John Garamendi has promised to unveil new pricing guidelines in the next two weeks. When he does, we ask for one thing - just be fair to ALL drivers.