California auto insurance ZIP code law about to change
April 11, 2008
John Garamendi the Commissioner of Insurance for the State of California amended the rules on auto insurance three years ago. The new rules said that insurance companies could no longer use ZIP codes as the main determining factor for deciding auto insurance rates.
He deduced that the premium paid should reflect the driving abilities and history of the driver, not which ZIP code area they may happen to live in. After nearly three years these new regulations will actually take effect on the 14th of July this year.
Unfortunately the California Department of Insurance states that the vast majority of auto insurance companies have yet to fully comply with these new regulations. Of the nearly 200 insurers in the state just 46 were already considered to be in compliance while the other three quarters of insurance providers were not.
Consumer Watchdog based in Santa Monica, was the leader in the campaign to force the system change onto the insurance company’s. They said through their spokesman Doug Heller, that, “There are still a lot of customers seeing very dramatic increases in rates because of ZIP Codes.”
Many California residents have discovered to their amazement that moving from a house in one ZIP code area to another can easily result in very large price hikes. Moving just a couple of miles from one ZIP code into another can result in increases of 20% to 35% in auto insurance premiums. This kind of increase must be based entirely on the ZIP code factor, as non of the other possible variables, such as age, driving history and so on, have altered.
A handful of companies moved quickly to change their ways of calculating auto insurance premiums. These included Geico and the giant Allstate insurance, who managed to alter their calculations to make the ZIP code situation a secondary issue in their premiums. Rather than the previous heavy reliance on the ZIPs to evaluate the clients risk factors.
Some others in the industry have not been so eager to drop into line with the new regulations, including 21st Century, insurers based in the Woodland Hills area. These companies reason that the ZIP code rating is still legal, and still falls within the regulations. And that the ZIP code is still a viable rating factor, when calculating car insurance in the state, at least for the next couple of months.
They seem to figure that there is no reason to move to the new system until the latest possible time, that the law allows. These companies do not seem to have any intention of not complying with the regulations, but they do seem to be putting of the evil day when they may have to give the driving public a fairer quotation, that has considerably less emphasis on the persons mailing address.
Way back in 1988 the voters of California voted for Proposition 103, which limited what insurers could charge for auto insurance premiums. This proposition also had a requirement that the insurance community should set rates that were based on the number of miles driven, and the drivers’ record, to calculate the premium.
The insurance companies immediately challenged the new reforms and argued they would lose millions if they were implemented. And that non-city dwellers would be discriminated against.
These drivers would be compensated with reduced premiums, as living outside of cities incurs less risk to the insurance company, which is why they needed ZIP codes to determine what kind of area the driver lived in. These legal wranglings dragged on for years, but now the regulations will change, even for the company’s that are taking their time getting there.
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Auto insurance protects the insured from losses relating to motor vehicles.
Does anyone know if I remain a California resident, but I take my car with me to the Philippines for a 6-8 month period, if this will cause a problem with my car insurance company (Progressive?)
Thanks.
I am shocked to learn that this law was actually in effect in July 2008. I will be contacting AAA who forced me to downgrade my policy because I moved to a new zip code. I had paid 5500 already and they wanted another 1200.00 due to my move , which they totally admitted was the reason for the increase in my policy. Also, I had to pay all of it immediately. I couldn’t so I cancelled my daughter and lowered the whole package. I ended up paying over 6000 for the year for a crappy policy. I, of course, had an accident less than three weeks later, the first one I have ever had–not in any way my fault. They refused to cover my car rental because I cancelled it three weeks earlier. I am going to write to John Garamendi and ask him why these companies are allowed to continue to harrass us with impunity. I am furious. I will also be writing to AAA who are the most disgusting insurance company I have had the misfortune to work with. How long are we going to be beaten up by these people. If I break the law, I get in trouble–why is AAA allowed to break the law?
I had moved from Mountain View,CA to Laguna Niguel,CA. I had to stay in a temporary apartment between the moves. My insurance premium from Liberty Mutual jumped with each address change. I have contacted LM and asked them about this CA law, but nothing has changed. It seems that LM has clearly broken the law. Is there anything the consumer can do in this situation?
Same thing happened to me with Geico: a rate increase of 50% for moving to a different zip code.
I went on- line to see just how many things factor into m onthly premiums, for auto insurance the list is rather extensive to say the least,we are being judged/held accountable for so many things. I don’t think its right a person can spend considerable amounts of time working on your credit, only to be told regardless how high your score is your zip code is the reason your paying more. That is just plain wrong!!!!