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Car Insurance

A Blog About Driving and Car Insurance in the USA

Monday, July 24, 2006

Insurance Industry Lobbyists Fight the Implementation of Proposition 103

OK, folks, an auto insurance pop quiz (don't worry, this one is easy.)

Which makes more sense to you:

  • When determining car insurance premiums, insurance companies should have the following priorities: a driver's driving record, annual mileage and years licensed.

    or

  • When determining car insurance premiums, insurance companies should have the following priorities: marital status and a driver's ZIP code.

I'm pretty confident that I can guess which option you chose. It's really a matter of common sense.

California Drivers: Remember Proposition 103?

Regulations that were approved by former California Insurance Commissioner Chuck Quackenbush let insurance companies place more emphasis on a driver's ZIP code and marital status when determining rates, as opposed to the more common sense (and fair) approach of emphasizing their driving history, the number of years they've been licensed and their average yearly mileage.

Current Insurance Commissioner John Garamendi wants to get the ball rolling on the implementation of Proposition 103, which is supposed to make car insurance regulations more consumer-friendly, but insurance industry lobbyists (specifically, the American Insurance Association, the Association of California Insurance Companies and the Personal Insurance Federation of California) have filed a lawsuit in Sacramento in an effort to thwart Prop 103.

When was Prop 103 passed by California voters? November 8, 1988!

Further details below in the following clip from a recent press release:

"The insurance industry filed suit late Wednesday to block auto insurance reform regulations crafted by Insurance Commissioner John Garamendi and given final approval by the Schwarzenegger Administration last week. The rules implement a requirement of the 1988 voter- approved Proposition 103 that insurers base auto premiums on motorists' driving safety records and not ZIP code.

'The insurance industry wants to stick its heels in the mud and stop reforms that will save good drivers billions of dollars,' said Douglas Heller, Executive Director of the nonprofit, nonpartisan Foundation for Taxpayer and Consumer Rights (FTCR). 'They want to charge some drivers with perfect records hundreds of dollars more for basic insurance because of the ZIP code in which they live. But the rules no longer allow that and the insurance companies' last-ditch lawsuit will be unsuccessful.'

The suit was filed in Sacramento Superior Court by three insurance lobbying groups -- American Insurance Association, Association of California Insurance Companies and Personal Insurance Federation of California. An insurance industry lawyer filed a companion suit in Sacramento on behalf of the California Farm Bureau, which has longstanding ties to the insurance giant Nationwide Insurance (formerly known as Farm Bureau Mutual Automobile Insurance). The suit seeks to restore loophole-ridden regulations crafted by disgraced former commissioner Chuck Quackenbush, which have allowed insurers to place more emphasis on ZIP code and a motorist's marital status than on driving record.

The lawsuit falsely claims that Insurance Commissioner Garamendi's rules would be impossible to implement in a manner fair to all customers. The fallacy of the industry's argument is exposed by the fact that last week Auto Club of Southern California announced that it would follow the Garamendi rules and would lower premiums for 88 percent of its policyholders by an average $134 each.

The Garamendi rules require insurers to reform their pricing systems over a two year period to ensure that driving safety records have more of an impact on premiums than ZIP codes or other secondary factors, such as the commonly used marital status factor. The new rules do not bar insurers from considering a customer's address in setting rates; the rules simply bar address from being prioritized over the policyholder's driving record, annual mileage or years licensed. By enacting Prop 103, voters required that those three factors play the biggest role in determining an individual motorist's premium.

'California voters required these reforms more than 17 years ago when they enacted Proposition 103. We will fight to ensure that this anti-consumer lawsuit does not stop the savings that good drivers have been waiting nearly two decades to receive,' said Heller. 'With auto insurers coming off the most profitable year in a generation, customers should view with contempt any insurance company that joins this lawsuit.'"


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