July 10, 2006

NOTHING COSTS MORE THAN IT USED TO:

Major Shift in Auto Policies: Rates would emphasize safety and mileage, not ZIP Codes, for drivers insured by Auto Club. Adherence to Prop. 103 is a win for Garamendi. (Marc Lifsher, July 10, 2006, LA Times)

In a move that could presage lower auto insurance premiums for many of California's 23 million drivers, the state's fourth-largest provider has agreed to base its rates on how safely and how much its customers drive rather than primarily on where they live.

The plan, to be announced today by the Automobile Club of Southern California and California Insurance Commissioner John Garamendi, would slice as much as $133 million from the annual bills of the club's nearly 1 million policyholders. More broadly, it could compel the club's rival insurers to follow suit.

The shift is a victory for consumer advocates, who say that rates based largely on ZIP Codes saddle city dwellers with higher premiums than suburban and rural drivers with similar records. It also is a coup for Garamendi, who has been working to force insurers to comply with requirements approved by voters with the passage of Proposition 103 in 1988.

In revising how it sets rates, the Los Angeles-based Auto Club is breaking ranks with the state's other major insurers. It expects that 88% of the 993,000 drivers it insures will see their bills drop 7% on average, or $134 annually.

Posted by Orrin Judd at July 10, 2006 8:42 AM
Comments

This is a complex issue. My personal view is that rates should be uniform throughout a state because car insurance is mandated by the state and political subdivisions are creatures of the state.

This view in not "constitutional" or "moral" however, and a state may allow different rates in different zipcodes, townships or otherwise.

Keep in mind that city folks are always prating about how great their lives are--all the hospitals, theaters, aports stadiums, and all. Can not it be said that those who have voted with their feet against the city deserve the small benefits of having foregone these advantages, among which are lower exposure to certain risks?

Posted by: Lou Gots at July 10, 2006 4:15 PM
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