ENDING ZIP CODE RATING AND DISCRIMINATION IN AUTOMOBILE INSURANCE IN CALIFORNIA

California law requires that drivers have automobile insurance, and requires that insurance companies determine premiums primarily on a policyholder's driving safety record, annual mileage, and years of driving experience - - factors over which drivers have control. The law was enacted as part of Proposition 103, passed by California voters in 1988. Nonetheless, insurers in California and other states base premiums primarily upon the ZIP code where policyholders live and on other factors such as gender and marital status.

In May 2003, Consumers Union, the Southern Christian Leadership Conference of Greater Los Angeles, the National Council of La Raza, Spanish Speaking Citizens' Foundation, the Foundation for Taxpayer and Consumer Rights, Public Advocates and the cities of Oakland, Los Angeles, and San Francisco filed a petition with California Insurance Commissioner John Garamendi to end these discriminatory practices.

Basing premiums primarily on ZIP code, gender, or marital status, rather than driving record, has severe economic and legal consequences for drivers across California. Consumers Union used insurers' filings with the California Department of Insurance to calculate the leading auto insurers' premiums for the same good driver with the same driving record, car and coverage, changing only the driver's ZIP code. The results were dramatic. For a female good driver, licensed 22 years without a single accident or violation, a mere change in ZIP code could result in premium increases of 111-238 percent, or $1,050-$1,700 per year, merely by changing her ZIP code. For Californians living on tight budgets, these surcharges make it difficult to make ends meet.

At town hall meetings conducted by Commissioner Garamendi across California, Consumers Union presented numerous reports documenting that ZIP code based rates hurt good drivers throughout the state. Garamendi agreed and in December 2005 announced his decision to adopt the amendment Consumers Union and the petitioners proposed. In June 2006, Garamendi issued new regulations requiring insurers to base premiums primarily on how policyholders drive, not where they live or their gender or marital status.

After the regulations were formally adopted by the state, insurers sued to try to block them. In August 2006, the 3rd District Court of Appeal denied the insurers' attempt to block the rules from going into effect while the lawsuit is considered. On August 17, 2006, insurers were required to submit plans to follow the state's new "good driver" regulations. The Department of Insurance must then review and approve the new plans and insurers must then implement them. Consumers Union hopes that consumers will begin seeing the results in their auto insurance bills before the end of 2006.