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.

Posted by admin | Filed Under articles 

Comments

4 Responses to “California auto insurance ZIP code law about to change”

  1. Rebates should be treated with caution say finance experts | one38.org on April 14th, 2008 5:59 am

    […] California auto insurance ZIP code law about to change […]

  2. Using refinance car loans | one38.org on April 28th, 2008 5:16 am

    […] California auto insurance ZIP code law about to change […]

  3. Finding a cheap car loan quote | one38.org on May 10th, 2008 5:13 am

    […] California auto insurance ZIP code law about to change […]

  4. Some FAQs on Auto Loan Refinance | one38.org on May 10th, 2008 5:15 am

    […] California auto insurance ZIP code law about to change […]

Got something to say?

You must be logged in to post a comment.